Margin Terms

Margin Eligible Securities

Although a lot of stocks and ETFs can be bought on margin, some securities available in a Capital One Investing℠ account cannot. We also apply our own criterion that meets or exceeds the Federal Reserve Board in determining which securities can be bought on margin. Penny stocks, IPOs, extremely volatile stocks, and options are examples of securities that cannot be bought on margin.

Tip: While margin can boost an investment strategy, buying securities on margin is not for everyone. Before investing on margin, please give the Margin Account Agreement the once over to review important risk disclosure information, and see our margin interest rates.

Collateral

The term collateral refers to assets used to secure a margin loan. If your margin loan defaults, the collateral becomes subject to liquidation.

Tip: Buying securities on margin isn't appropriate for every investor. Before investing on margin, please read the Margin Account Agreement for important risk disclosure information, and see our margin interest rates.

Margin Calls

From time to time, we may require an investor to sell shares or make a margin deposit (i.e. deposit additional cash or securities) to meet our maintenance requirement.

If one or more of the stocks you bought on margin decreases in value past a certain threshold, we'll send you a margin call. If you don't deposit additional cash or margin eligible securities, or liquidate sufficient holdings by the maintenance call due date, we'll go ahead and liquidate securities in your account to meet the maintenance call. The amount of stock sold could be up to 4 times the amount of the call.

Note: Buying securities on margin isn’t appropriate for every investor. Before investing on margin, please read the Margin Account Agreement for important risk disclosure information, and see our margin interest rates.

Liquidate

Basically, liquidating is the process of turning securities into cash. You can do this by placing a sell order on the open market. After the sell order, the cash then goes back into your cash balance

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In the case of a margin call, the securities in your account may be liquidated to bring the account up to the maintenance requirement.

Tip: Buying securities on margin isn't perfect for every investor. Before investing on margin, please read the Margin Account Agreement for important risk disclosure information, and see ourmargin interest rates.

Leverage

Leverage lets you borrow money to fund your investments. Using leverage comes with more risk because you have the potential to lose more money than you invested.

For example, let's say you buy 20 shares of stock and the total cost is $10,000. If you want to buy more stock (but lack the funds), you can borrow up to another $10,000 with leverage. That way, you can increase the amount of shares you own. If the value of the shares goes down in price, you may be subject to a margin call.

Tip: Buying securities on margin isn't right for every investor. Before investing on margin, please read the Margin Account Agreement for important risk disclosure information, and see our margin interest rates.

What is a Pattern Day Trader?

Pattern day trading is more than just frequent buying and selling throughout the day. It’s an official status only for margin accounts that meet certain trading criteria.

First, let’s define a Day Trade. A Day Trade is when you buy and sell (or sell short and buy) the same security in the same market day. We’ll call this a “round trip.” If you make four or more round trips within a 5 market day period, you will be designated as a pattern day trader even if each of the four round trips is done with a different security.

Once you’re designated as a Pattern Day Trader, we are required by security regulations to treat your account a little differently. The biggest impact to you is with your margin status. With the Pattern Day Trader flag, your minimum account equity (if you want to continue to use margin) is $25,000. If your equity falls below that level, your account will be treated as a cash account (no margin available).

Tip: Pattern day trader accounts are not eligible for instant withdrawals to Capital One 360 accounts and require electronic transfers instead