Margin
What is margin trading?
“Margin trading” can mean engaging in a transaction in which securities are purchased partially through a margin loan using the securities as collateral. Margin trading can also mean trading investment products such as futures or options in which an initial “margin” deposit is made to secure your obligations.
Please note margin trading only happens in margin accounts.
For further detail please refer to our Disclosure of Risks of Margin Trading and Margin Account Agreement.
Disclosure of Risks of Margin Trading
Margin Account Agreement
How does margin work?
Imagine you are going to buy a $500,000 worth house, your bank requires you to put down at least 20%. So you buy the house with $100,000 of your own money in cash and a loan of $400,000. A year later you sell the home for $550,000 (or in some cases $450,000).
Using margin to buy securities works the same way. There are some terminologies though.
Initial Margin Requirement
The minimum portion of a new security purchase that an investor must pay for in cash. Just like your $100,000 down payment in the above case.
Maintenance Margin Requirement
The amount of equity which must be maintained in order to continue holding a position. If the value of your house goes down, your bank may demand additional money. That works the same way here. You have to maintain a certain level of equity in your account. The amount required is called Maintenance Margin Requirement.
Does it cost me to use margin?
If you do not have enough cash to pay for a certain purchase and borrow from us, then we will charge interest on the amount borrowed. See Pricing for detail.
How are margin requirements calculated?
When placing a trade, our trading platform will display detailed margin information. The most common margin situations are calculated as following.
Long Positions
| Margin Requirement | ||
|---|---|---|
| Marginable: | ||
| Only TSE, NYSE/Arca, NASDAQ, and qualified stocks* that are a constituent of eligible indices are marginable. | Margin Cash or RSP/TFSA |
50% * Stock Value 100% * Stock Value |
| Eligible for Reduced Margin: | ||
| Canadian stocks: IIROC’s List of Securities Eligible for Reduced Margin | Margin Cash or RSP/TFSA |
30% * Stock Value 100% * Stock Value |
| US stocks: Option Clearing Corp-listed option underlying stocks | Margin Cash or RSP/TFSA |
30% * Stock Value 100% * Stock Value |
| Non-Marginable: | ||
| Stock price below 2 CAD | Margin Cash or RSP/TFSA |
100% * Stock Value 100% * Stock Value |
| Stocks with Market Capitalization below 250 million USD | Margin Cash or RSP/TFSA |
100% * Stock Value 100% * Stock Value |
| Stocks traded on Venture exchange. | Margin Cash or RSP/TFSA |
100% * Stock Value 100% * Stock Value |
| Other: | ||
| Long and short positions same underlying stock with one leg cleared in the US and the other leg cleared in Canada. | Margin Cash or RSP/TFSA |
5% * Long Stock Value N/A |
Short Positions Traded on Approved Exchanges
| Margin | |
| Initial Margin |
50% * Stock Value
Minimum Margin >= USD 2.50 * Number of Shares |
| Maintenance Margin | Same as Initial |
Short Positions Eligible for Reduced Margin on Approved Exchanges
| Margin | |
| Initial Margin |
30% * Stock Value
Minimum Margin >= USD 2.50 * Number of Shares |
| Maintenance Margin | Same as Initial |
All Other Short Positions including Stocks < CAD 2 and TSX Venture Exchange
| Margin | |
| Initial Margin |
100% * Stock Value
Minimum Margin >= USD 2.50 * Number of Shares |
| Maintenance Margin | Same as Initial |
Additional Information
- Accounts with equity below 2000 USD cannot use any margin.
- OTT and IBKR may reduce the marginability of certain securities.
- A minimum margin requirement of 2000 USD applies to an account with short positions.
- OTT and IBKR reserves the right to change its policies without notice.