Can I Buy Stock on Margin? Guide

A clear, beginner-friendly explanation of what it means to buy stocks on margin, how U.S. equity margin works, rules and costs, the main risks and benefits, practical steps to open and manage a mar...

2025-12-29 16:00:00

By Meta Cipher

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Can I Buy Stock on Margin?

can i buy stock on margin? Short answer: yes — you can buy U.S. stocks on margin through a margin-enabled brokerage account, but doing so requires meeting regulatory and broker requirements, accepting interest and liquidation risk, and understanding how leverage magnifies gains and losses.

As of January 15, 2026, according to Benzinga reporting based on SEC filings, insiders including Gary E. McCullough (Commercial Metals Co) reported open-market purchases disclosed on Form 4; such public filings illustrate why understanding financing methods and disclosure matters when evaluating trades. These developments underscore why investors ask: can i buy stock on margin and when should leverage be used?

This article explains what buying on margin means for U.S. equities, how margin mechanics work, who is eligible, costs, risks, common uses, regulatory rules, practical steps to open and manage margin accounts, and a brief comparison to crypto margin offered by venues such as Bitget. The content is informational and not investment advice.

Definition and overview

Buying on margin means purchasing securities using borrowed funds provided by your broker. When you buy stock on margin, your broker extends a line of credit secured by the securities and cash in your account. The purchased securities — together with other marginable assets in the account — serve as collateral for the loan.

The primary purpose of margin is to increase buying power by introducing leverage: with a given amount of cash you can control a larger position. That can amplify returns when prices rise, but it also amplifies losses when prices fall.

Key points at a glance:

Margin = broker loan secured by account assets.
Collateral includes marginable stocks, ETFs and some bonds.
Leverage increases both potential gains and potential losses.
Brokers charge interest and can liquidate positions to protect the loan.

Basic mechanics of buying on margin

Margin account vs cash account

A margin account is a brokerage account in which the broker extends credit to you so you may borrow to buy additional securities. Opening a margin account requires signing a margin agreement that discloses risks and terms.

A cash account does not permit borrowing — you can only use settled cash to buy securities. In a cash account you cannot short sell or use margin trading features.

The signed margin agreement is legally required and outlines interest charges, collateral rules, margin maintenance levels, and the broker’s rights to liquidate positions.

Initial margin and maintenance margin

Two margin percentages matter most:

Initial margin: the percentage of a purchase you must fund with your own cash or equity at the time of the trade. In the U.S., Federal Reserve Regulation T commonly sets an initial margin requirement of 50% for many equity purchases. That means to buy $10,000 of stock you typically need $5,000 of your own funds and may borrow the remaining $5,000.
Maintenance margin: the minimum account equity you must maintain after the trade. Maintenance requirements are usually set by exchanges, FINRA or your broker and commonly fall between about 25% and 40%, though brokers may set higher limits based on asset type or market conditions.

Example: With a Reg T 50% initial margin and a broker maintenance margin of 30%, if your purchased stock falls enough that your equity / market value ratio drops below 30%, you could face a margin call.

How margin loans are collateralized and repaid

Securities and other marginable assets in your account act as collateral for the loan. The broker monitors the account’s equity relative to the market value of holdings. If equity falls below maintenance requirements, brokers can demand additional cash (a margin call) or immediately sell securities to reduce the loan.

Loan repayment occurs when:

You sell some or all of the borrowed-purchase securities (proceeds reduce the loan).
You deposit cash into the account.
The broker liquidates positions to bring the account back into compliance.

Margin interest accrues on borrowed balances. Interest compounds (depending on how brokers apply it) and reduces net returns. Interest rates vary across brokers and often depend on the size of the loan and prevailing short-term rates.

Who can buy on margin / account eligibility

Typical broker requirements include:

Minimum account equity: many U.S. brokers require at least $2,000 in initial equity to open a margin account, consistent with regulatory guidance for options trading and margin activity.
Signed margin agreement: legal acknowledgement of terms and risks.
Application, disclosure and suitability checks: brokers must assess whether margin trading is suitable given your experience, financial situation and investment objectives.

Higher-tier programs (portfolio margin, extended margin or advanced trading permissions) often require larger minimum equity thresholds and additional approvals. For example, portfolio margin eligibility is commonly available for accounts with equity of $100,000 or more and requires the broker’s risk approval.

Brokers may deny margin privileges or impose higher requirements if your trading history, assets, or credit profile suggest elevated risk.

Which securities can be bought on margin

Common marginable securities:

Most exchange-listed common stocks above broker-specific price thresholds.
Many margin-eligible ETFs and government or corporate bonds.
Some mutual funds (depending on broker rules and settlement timing).

Non-marginable or restricted assets (examples):

Certain penny stocks and low-priced shares.
Some mutual funds during initial purchase windows or unsettled funds.
Cash-like instruments or deposits that do not qualify as margin collateral.
Certain options strategies and derivatives may be restricted or require special approval.

Eligibility rules vary by broker and by exchange listing standards; your broker’s margin schedule details which symbols are marginable and at what initial/maintenance rates.

Costs: interest, fees, and other charges

The main costs of buying on margin are:

Margin interest: charged on the outstanding borrowed balance. Rates vary by broker and often depend on the loan size (tiered schedules), benchmark rates and special promotions.
Compounding: unpaid interest may compound monthly or daily, which increases the effective cost over time.
Trading commissions or fees: depending on broker pricing.
Borrow costs for shorts (if you use margin to short sell), and other financing or administrative charges.

Interest reduces net investment returns. For example, a 6% margin interest rate subtracts from realized gains and increases the size of losses when positions move against you.

Always check your broker’s margin rate table and how often interest is assessed and capitalized.

Risks of buying on margin

Leverage amplifies losses and gains

Leverage increases the size of your exposure relative to cash invested. That means:

Upside: gains are magnified when the security rises.
Downside: losses are magnified when the security falls; you can lose more than your initial cash.

If a position moves against you, losses may exceed the cash you deposited, creating a negative account equity situation that requires immediate funding.

Margin calls and forced liquidation

A margin call happens when your account equity falls below maintenance requirements. Brokers may:

Require you to deposit additional cash or marginable securities within a short timeframe.
Sell one or more of your holdings without prior notice to restore required equity.

Brokers have broad discretionary rights under typical margin agreements; they may liquidate assets quickly in volatile markets. Forced liquidation can occur at unfavorable prices and may create realized losses greater than those projected by the investor.

Other risks (interest, concentration, lending of securities)

Ongoing interest cost can erode returns, especially in longer-term positions.
Concentration risk: using margin to heavily concentrate in one stock or sector increases downside exposure.
Securities lending: brokers may lend securities held in margin accounts to short sellers; this can have implications for voting rights or corporate actions.
Tax/financial implications: realized gains/losses and interest deductibility follow tax rules that vary by jurisdiction; consult a tax professional.

Benefits and common uses

Why investors use margin:

Increase buying power to pursue larger positions with the same cash.
Implement hedging strategies or paired trades.
Facilitate short selling (shorts require margin collateral).
Execute tactical leverage in the short term for specific convictions.

Margin can be a useful tool for experienced, risk-tolerant traders who understand the financing cost and the potential for rapid loss.

Caveat: for most long-term buy-and-hold investors, margin increases complexity and risk and may not be appropriate.

Portfolio margin and advanced margin programs

Portfolio margin is a risk-based margining system that typically reduces margin requirements for well-hedged portfolios, enabling greater buying power for eligible accounts. Characteristics:

Eligibility: commonly requires $100,000 or more in account equity and broker approval.
Risk-based methodology: measures portfolio risk rather than applying fixed per-position percentages.
Tradeoffs: portfolio margin can increase buying power but also adds complexity and may produce larger intraday swings in required margin.

Advanced margin programs may also include specialized rates, intraday credit facilities, or tailored collateral arrangements for institutional clients.

Margin and short selling

Short selling is inherently a margin activity because you sell borrowed shares and must post collateral. Important distinctions:

Short positions require margin as collateral and are subject to margin requirements that can be higher than for long positions.
Shorting exposes you to theoretically unlimited losses, since a stock’s price can rise without bound.
Short sellers may also face borrow costs and recalls if the lender wants back the shares.

Because short-selling uses borrowed securities and collateral, margin discipline and monitoring are essential.

Regulatory framework (U.S. focus)

Key regulatory points for U.S. equity margin:

Federal Reserve Regulation T (Reg T): sets standard initial margin requirements (commonly 50% for many equity purchases) and governs extension of credit by brokers.
FINRA and exchange rules: establish maintenance margin standards and surveillance.
SEC guidance and investor education: the SEC publishes resources explaining margin risk and broker disclosure obligations.

Brokers can (and often do) impose stricter initial or maintenance requirements than regulators require. Always review your broker’s margin disclosure and schedule.

Comparison: Margin for stocks vs margin in cryptocurrency markets

Some crypto trading venues (including regulated and regulated-like platforms) offer margin and leveraged trading. A few key differences to note:

Volatility: crypto markets can be materially more volatile than many U.S. equities, increasing the speed and size of price moves and liquidations.
Regulatory protections: crypto margin often operates under different regulatory frameworks; protections that apply to U.S. broker-dealer margin clients may not apply in the same way to crypto accounts.
Margin mechanics and rules: crypto platforms may use higher leverage, lower maintenance margins, and different liquidation procedures.
Counterparty/exchange risk: crypto margin depends on the operator’s solvency and risk controls; consider custodial, insurance and operational risk.

If you are exploring crypto margin, consider a venue with clear custody practices and robust risk controls. For users of crypto margin or Web3 wallets, Bitget provides margin products and the Bitget Wallet for custody and trading tools. Understand platform-specific rules and protections before using leverage in crypto markets.

International considerations and jurisdictional differences

Margin rules and eligible collateral differ by country. Examples:

Canada, EU and other jurisdictions set their own initial and maintenance margin rules and may restrict certain instruments from margin trading.
Brokers outside the U.S. may apply different minimum account sizes, margin formulas and disclosure requirements.

If you trade across jurisdictions, confirm local regulations and your broker’s cross-border policies.

How to open and manage a margin account (practical steps)

Steps to open and manage a margin account:

Choose a broker and confirm margin offerings, margin rate schedules, and marginable asset lists. (If you trade crypto, review Bitget’s margin features and Bitget Wallet.)
Apply for a margin account and sign the margin agreement; provide required identity and funding information.
Fund the account with the required minimum equity (commonly $2,000 in the U.S., but broker minimums vary).
Understand initial and maintenance margin percentages for your intended securities.
Use margin calculators and real-time margin monitoring tools provided by your broker.
Maintain a cushion above maintenance levels to reduce the likelihood of margin calls.
If a margin call occurs, promptly deposit cash or sell positions to restore compliance.

Best practices for management:

Monitor positions and margin metrics daily (or more frequently in volatile markets).
Know your broker’s liquidation policy and priority of sold assets.
Keep emergency liquidity available to meet potential margin calls.

Risk management strategies for margin users

Prudent strategies for margin use include:

Conservative position sizing: limit the portion of your portfolio financed by margin.
Diversification: avoid concentrating borrowed funds on a single high-risk stock or sector.
Stop-losses and limit orders: use orders to limit downside, but understand execution risk in fast markets.
Hedges: use options or offsetting positions to reduce directional exposure where appropriate and allowed.
Maintain liquidity: keep cash or marginable securities available to meet margin calls.

Remember: stop-losses can fail in gaps or fast markets; margin calls can still occur before orders are executed.

Examples and worked scenarios

Example 1 — Basic margin purchase (Reg T 50%):

You have $5,000 cash. You want to buy $10,000 of stock.
With a 50% initial margin, you borrow $5,000 from the broker and buy $10,000 worth of shares.
If the stock rises 20% to $12,000, your equity is $12,000 - $5,000 loan = $7,000. Your return on cash: ($7,000 - $5,000) / $5,000 = 40% (amplified vs the 20% stock gain).
If the stock falls 20% to $8,000, equity = $8,000 - $5,000 = $3,000. Your loss on cash is ($5,000 - $3,000) / $5,000 = 40% (losses amplified).

Example 2 — Margin call scenario:

You buy $10,000 of stock borrowing $5,000. Maintenance margin = 30%.
Maintenance equity required = 30% * market value.
Let M = market value. Equity = M - loan ($5,000). Margin requirement: M - 5,000 >= 0.30M -> 0.70M >= 5,000 -> M >= 7,142.86.
If market value falls below $7,142.86, your account no longer meets maintenance and you face a margin call.

Worked numbers help illustrate how quickly price movements can trigger calls when leverage is used.

Alternatives to buying on margin

If you want leverage or exposure without a standard margin loan, consider alternatives (each has different risk profiles):

Options: limited-risk strategies (e.g., buying calls) or more advanced spreads; options carry time decay and other complexities.
Futures: standardized leverage in regulated markets (not available for every investor and requires specific accounts).
CFDs (where legal): contract-for-difference products that provide synthetic exposure with margin-style financing (legal status and protections vary by jurisdiction).
Leveraged ETFs: funds that seek daily leveraged returns; they can be used for short-term exposure but are generally unsuitable for long-term buy-and-hold due to compounding.
Cash-only purchases: avoid borrowing and the costs/risks of leverage.

Each alternative has tradeoffs. Understand mechanics, costs and suitability before using them.

Tax and accounting considerations

Tax rules vary by jurisdiction. Some points to consider (U.S.-focused but generalizable):

Investment interest expense: in some jurisdictions, margin interest may be deductible as investment interest subject to limitations; consult a tax professional for your situation.
Capital gains and losses: realized gains and losses are taxed per local rules and holding periods.
Reporting: brokers provide year-end statements and tax forms reflecting interest paid and proceeds from sales.

Tax treatment of margin interest and derivative transactions can be complex. Seek professional tax advice for personalized guidance.

Frequently asked questions (FAQ)

Q: Can I lose more than I invest?
A: Yes. Using margin can lead to losses that exceed the cash you deposited because borrowed funds increase exposure and brokers can liquidate positions, potentially leaving a negative balance.

Q: How much can I borrow?
A: The amount depends on the initial margin requirement (commonly 50% under Reg T for many equities) and broker policies. Your buying power equals cash plus allowable margin.

Q: Does every broker offer margin?
A: No. Not every broker offers margin; margin availability, rates and minimums vary. Check your broker’s margin agreement and disclosures.

Q: What happens on a margin call?
A: The broker will require you to deposit cash or marginable securities to restore required equity. If you do not, the broker may sell positions without prior consent.

Q: Is margin suitable for beginners?
A: Margin is generally recommended only for experienced or risk-tolerant investors who understand leverage, interest costs, and liquidation risk.

Notes on scope and limitations

This article focuses on buying U.S. equities on margin with a brief comparison to crypto margin. It is for informational purposes only and does not constitute financial, tax, or investment advice. Margin rules, rates and broker policies change; always check current broker disclosures and regulatory guidance before trading on margin.

Reporting context and market examples

As noted earlier, insider transaction reporting and corporate results provide context for market activity. As of January 15, 2026, according to Benzinga and SEC filings, Commercial Metals Co (NYSE: CMC) director Gary E. McCullough reported an open-market purchase of 2,222 shares worth $165,005 on a Form 4 filing. The same news feed showed Commercial Metals trading around $75.65 that morning. Such filings illustrate public disclosure rules for insiders and why some investors monitor insider activity as one input — not a sole signal — in investment analysis.

Other contemporaneous filings and corporate reports (e.g., insider purchases reported for Walmart and option acquisitions at Tesla, and company quarterly results such as Delta Air Lines) were noted in market reporting during mid-January 2026. These items exemplify why investors ask whether to use margin: corporate events and insider actions can influence short-term price behavior, but margin decisions should be guided by your financing capacity and risk tolerance.

Practical checklist before using margin

Read and sign the broker’s margin agreement; understand liquidation rights.
Confirm minimum account equity and marginable asset lists.
Review margin interest rates and how interest is charged.
Set conservative position size limits and maintain liquidity cushion.
Use broker margin calculators and real-time monitoring tools.
Consider alternatives (options, leveraged ETFs) if you seek controlled leverage.

If you trade crypto margin, consider a regulated approach and platforms with clear custody policies. Bitget offers margin and leveraged trading features and provides the Bitget Wallet for custodial and self-custody workflows; review platform rules and protections carefully.

Further explore margin tools on your broker’s platform and educational resources to ensure you understand how your account will behave under stress scenarios.

Final notes and next steps

Using margin can be a powerful way to increase exposure, but it introduces significant costs and risks. If you still wonder "can i buy stock on margin," remember: the mechanics are straightforward — borrow from your broker, use securities as collateral — but prudent use requires discipline, monitoring, and understanding of interest, margin calls and liquidation rights.

To learn how margin features are implemented in practice, check your broker’s margin disclosure and try paper-trading scenarios or margin calculators. If you trade crypto and want platform-specific margin details, explore Bitget’s educational pages and the Bitget Wallet to understand custody and margin settings.

For personalized tax or legal guidance related to margin or leveraged strategies, consult a licensed tax professional or attorney.

Reported date and source for market context: As of January 15, 2026, according to Benzinga reporting and referenced SEC Form 4 filings.

Article prepared for general informational purposes. Not investment advice. Verify current broker terms and regulatory materials before trading on margin.

The content above has been sourced from the internet and generated using AI. For high-quality content, please visit Bitget Academy.