Understanding Intraday Margin Buying Power

Schwab calculates intraday margin buying power by dividing a trader's maintenance excess—the equity in an account above the maintenance requirement—by 0.25, equivalent to multiplying it by 4. The result is the dollar value of eligible stock the trader can trade intraday, assuming a standard 25% margin requirement. This dynamic balance rises or falls as trades execute, market values change, or positions become concentrated.

Not all stocks will be held at the standard 25% requirement. Requirements may differ based on volatility, liquidity, and several other risk factors. Let's look at examples where a trader with $10,000 in maintenance excess (the account equity that exceeds the minimum maintenance requirements) considers two stocks:

• Example 1: QRS trades at $50 per share and has a 25% margin requirement. Schwab platforms always assume a 25% requirement, so $10,000/0.25, or $40,000, will be displayed as intraday margin buying power. The only calculation the trader must do is intraday margin buying power divided by price per share to see how many shares they can purchase:
  • At $50 per share, the trader can buy 800 shares ($40,000/$50) of QRS.
     
• Example 2: ZYX trades at $50 per share but has a 35% margin requirement. Because this requirement is higher than the standard, the trader must manually calculate intraday margin buying power before determining how many shares to purchase:
  • Intraday margin buying power for ZYX is $10,000/0.35, or $28,571.43.
  • At $50 per share, the trader can buy 571 shares ($28,571.43/$50) of ZYX.

The trader can buy fewer shares of ZYX than QRS because ZYZ has a higher margin requirement.

Consider an account with $7,000 of available cash for trading, $10,000 of maintenance excess, $14,000 of stock buying power, and $40,000 of intraday margin buying power. If the trader buys $20,000 of QRS (held at 25%), the trade will be accepted because it is within the intraday margin buying power balance.

Stock buying power would fall to negative $6,000 while intraday margin buying power remains positive at $20,000. If the trader does not correct this negative stock buying power by 8 p.m. ET, they will be issued a Reg T (or Regulation T) call.

1. What is the security's margin requirement? Schwab displays an intraday balance based on a standard 25% requirement. If the security has a higher margin requirement, the dollar value of stock the account can purchase will be lower.
   • Traders can check a security's margin requirement on Schwab.com. First, enter a ticker in the search bar. Then, in the Overview section, scroll to Details to view Margin Requirements.

1. What will the total cost of the trade be? On the thinkorswim^® platform, traders can review the cost of the trade and resulting buying power in the order preview pop-up, which loads after creating an order and selecting the Confirm and Send button. Using intraday margin buying power can lead to the stock buying power turning negative. 
   • The example trade below would take the account into negative stock buying power and generate the warning for a potential Reg T call. 

Intraday margin buying power allows for flexibility in day trading. Traders should remember that this is an "intraday" balance that will not carry overnight and should fund their account or reduce positions before 8 p.m. ET when needed to avoid a margin call. It's important to monitor balances, check a security's margin requirement on Schwab.com, and use the thinkorswim order preview before placing any trade.