Buying Power

Buying Power, sometimes referred to as purchasing power, is the money (cash and margin) available to an investor to buy marginable securities in an account approved for margin. Buy orders will always use the money market cash balance before using credit. As a result, once the cash balance reaches zero, the loan balance will be created. A basic way, but not 100% accurate, to calculate your buying power is as follows:

Note: Non-marginable securities do not contribute to your buying power. In addition, some marginable securities may have an initial rate higher than 50%, which reduces the buying power.

Even if you do not have cash or currently have a margin loan balance, you may still be able to purchase additional securities if your buying power is greater than zero.

Your buying power may fluctuate with the value of your securities throughout the day. Transactions that affect buying power throughout the day include trade executions, open trade orders and money movement into and out of the account. When using buying power to place a trade to buy securities, the order cannot put the account into a maintenance call. You should also note that an account will not have buying power if the equity in the account goes below the minimum equity requirement.

Important: Buying securities on margin is not appropriate for all investors. Before investing on margin, please read the Margin Account Agreement for important risk disclosure information, and see ShareBuilder's margin interest rates.