How to use Margin with Interactive Brokers

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Updated version of this video:
   • How to Properly Use Margin with Inter...  

Hi in this video we covered margin trading and things that you need to know if you have a margin account with Interactive Brokers. We went over the basics of margin accounts, common confusions that beginners have, as well as discussed some of the overall pros and cons to margin trading. One benefit of a margin account is the ability to hedge a portfolio using futures. These products offer higher leverage than stocks and they are a common choice for portfolio balancing. IB supports margin trading in retirement accounts however you should refer to their documentation for more details. Margin trading with IB has an account minimum of $2000 USD. If the account drops below that it loses it’s margin capabilities and becomes a cash account.

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Correction: ⚠️
The way we explained the first example about margin interest was partially incorrect. When entering a trade in a margin account, the entire value of the trade is still debited from your cash balance. So if the value of the trade is $16k and the initial margin is 6K and you have 10k in your account. Upon fully entering this trade you would now have a negative cash balance of -$6k. The interest paid for this example is on the negative cash balance that is held in the account. Margin interest can apply to other cases not shown in this video like overnight short positions or negative cash balances that resulted from a currency conversion.

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00:00:00 Intro / Margin trading basics
00:01:55 How to determine initial margin / yearly interest
00:04:23 Maintenance in a margin account
00:05:27 Pros of a margin account
00:07:09 Easier to diversify
00:08:33 Cons of a margin account
00:10:17 Final note