Three Ways to Use Margin and Leverage

November 21, 2022
Learn three ways investors and traders can maximize the use of margin while managing the risks of leverage in their investing strategies.
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How do margin loans work at Schwab?

Leveraging Your Assets to Manage Your Wealth

Borrowing against your assets can often act as a tool to manage wealth. Here's how to use debt strategically—even in some cases when you can afford to pay cash.

Margin: How Does It Work?

In the same way a bank can lend you money if you have equity in your house, your brokerage firm can lend you money against the value of the investments in your portfolio.

What to Know About Margin

Here are some things to consider when using margin and four tips for managing your risk.

Options carry a high level of risk and are not suitable for all investors. Certain requirements must be met to trade options through Schwab. Please read the Options Disclosure Document titled Characteristics and Risks of Standardized Options before considering any options transaction. Supporting documentation for any claims or statistical information is available upon request.

When considering a margin loan, you should determine how the use of margin fits your own investment philosophy. Because of the risks involved, it is important that you fully understand the rules and requirements involved in trading securities on margin. Please read the Margin Risk Disclosure Statement for more information.

With long options, investors may lose 100% of funds invested. Multiple leg options strategies will involve multiple commissions. Spread trading must be done in a margin account. Writing uncovered options involves potentially unlimited risk.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor should review an investment strategy in the context of his or her personal situation before making any investment decision.

Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.

Short selling is an advanced trading strategy involving potentially unlimited risks and must be done in a margin account. Margin trading increases your level of market risk. For more information, please refer to your account agreement and the Margin Risk Disclosure Statement.

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