LogFAQs > #951000108

Well like I said you can mitigate the risk of events like today mattering by simply not using a lot of margin relative to your portfolio size. If your portfolio size is 25k without margin and you're only using like 3k of margin you're not likely to get a margin call even after something like today unless you picked the absolute hardest hit stocks. I used the 1k free margin on Robinhood for most of while I was using it (and for most of when I was using robinhood that was a non-negligible amount of my portfolio and never once got a margin call and I had some rather nasty days-- I did get get a warning a couple of times but yeah.

Now the problem with margin is the broker will usually let you match your investment in margin by default, with that being adjusted by maintenance (a risk value associated with each stock). And then if you maintain a good margin there is a good faith modifier of sorts that lets you borrow even more.

So a 25k portfolio could in theory get 25k of margin loaned to them or even more if they get that good faith up. Realistically they'd probably get closer to 10-15k due to maintenance rules, but that's still much much too high. If you keep your borrowed margin down to closer to like 10% of your portfolio in my experience it seems pretty unlikely to actually trigger a margin call, and if your portfolio is sufficiently large even a low value like 10% that can matter. Like even for me, I can get like 4k of margin lending with that rule of thumb and that would be enough to grab like 100 shares of FUBO for passive income every week, which is nice, and way over the interest I'd pay on that!

(I actually can't, because my portfolio is almost all calls now, which have 100% maintenance meaning I can't tap into margin, but you know)

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No problem!
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