In this video, Ross from Warrior Trading explains how to know if a stock is marginable. He also explains buying power and what this means when trading with your broker. On the Lightspeed Trading platform, these are noted for each stock and within a specific area on the window.
Hey, everyone. Ross here, from Warrior Trading. So, I want to answer a question that you may have, which is how I know if a stock is marginable or not. How do I know whether or not I can use my margin to buy the stock?
So when you have a margin account, if you put in $25,000, you'll have times four in available buying power. That means you'll have $100,000 in buying power. However, that means you're using your leverage, and you're using the margin that's available to you, but the broker will restrict margin on certain stocks. So how do you know which stocks you can use the margin on and which stocks you can't use it on?
All right, so let's look in the platform. So, on the Lightspeed Trading platform, what you'll notice in the top right-hand corner is this little 25% icon. When you see that you know that you only need 25% cash on hand to take this as a day trade. So, if I want to buy $100,000 worth, and I've got $25,000 cash, that means I've got $100,000 in buying power. I can buy the full $100,000 worth of this stock. That's for a day trade. Now, overnight margin is always two-to-one, not four-to-one.
Now, if you look at another stock, a lower-priced stock ... let's see, KTOV. This is one today. This is a lower-priced stock, and it says 100%. That means 15 million shares of volume today, but you can only use your cash equity balance. You cannot use your buying power. Now, this account here is an IRA account. I have my equity, and I don't have margin. I can only use this amount, but if I switch over to my traditional account, you'll see I've got the $44,000, times four is $175,000 in buying power. But with KTOV, I can only use this amount here. With Facebook, well, I can use all the buying power over here.
So generally what I've found to be true, this is a little bit of a generalization, is that most stocks below $3, or even below $5, you'll have a little bit of a harder time finding 100% ... or finding that you can use 100% of your buying power and that they're fully marginable. You'll find some that are: Sirius Satellite Radio ($SIRI). Here, you can see, as of today, you can use your margin on it. But a lot of the lower-priced stocks, because they're more volatile, because they're riskier, the brokers use a clearing firm. The clearing firm is going to restrict margin on them, and it's a risk management measure. They don't want to have someone jump into one of these stocks using all their buying power, only for it to drop 50% in one day, and now they've got a margin call.
But the way you can tell whether a stock is marginable or not is on Lightspeed, looking in the top corner, just like that. Now, other platforms are different and may have that notice in a different place, or may not have that notice at all, but the nice thing with Lightspeed is you can see it right there. So, you can know as soon as you pull the stock up, am I going to be able to use my buying power, or is this cash only? And in this case, cash only, so I'm a little bit restricted with how many shares I can buy. You just have to be able to plan accordingly.
All right, so I hope that's answered any questions you may have on how you know if a stock is marginable. As always, if you have more questions, feel free to reach out.
In this video, Ross from Warrior Trading explains the time and sales window on Lightspeed Trader. This goes hand in hand with the level 2 window on the trading platform. This allows traders to see what other traders are doing with a specific stock, and whether they are buying or selling.
In this video Ross, from Warrior Trading explains Level 1 Market Data and how it relates to a stock. In the Lightspeed Trader platform, he walks through specific stocks and the plethora of data available for level 1 market data. This includes current price, best bid, last price, amount of volume today and much more!
Lightspeed is a division of Lime Brokerage LLC. Lime Brokerage LLC is not affiliated with these third-party market commentators/educators or service providers. Data, information, and material (“content”) are provided for informational and educational purposes only. This content neither is, nor should be construed as an offer, solicitation, or recommendation to buy or sell any securities or contracts. Any investment decisions made by the user through the use of such content is solely based on the users independent analysis taking into consideration your financial circumstances, investment objectives, and risk tolerance. Lime Brokerage LLC does not endorse, offer nor recommend any of the services or commentary provided by any of the market commentators/educators or service providers and any information used to execute any trading strategies are solely based on the independent analysis of the user.