Nowadays , many brokerage and investment firms allows their customer to have Margin on their account. Margin is a simple way to increase your buying power and cash available by simply pledging your current investments as collateral.
Below are the most basic rules :
- First, a stock has to trade above the set limit per share for 5 consecutive days before it can be bought or moved into Margin. Also, if a stock is between set minimum and mximum level per share, the brokerage firm might increase the requirement levels of the account.
- A stock has to trade on a major exchange before it can be marginable. The NYSE, NASDAQ, and AMEX are all major exchanges. No Over-The-Counter(OTC) or Bulletin Board stocks can be put in Margin. Also no thinly traded or “Pink Sheet” stocks are marginable.
- The stock cannot be listed on any brokerage firm restricted lists. Depending on where your account is held, some brokerage houses have restrictions against certain stocks to be in Margin. A good example of this would be a highly volatile, low priced stock.
- Finally, the stock has to be considered Common or Preferred in order to be in Margin. Mutual Funds are also allowed. In some cases, ETFs, UIT’s and REIT’s are allowed to be in Margin as well.