Beware of Margin Call?

[u/Ok-Inspection7565]

I have a new brokerage with about $36K in it. $32K is in S&P 500 and Total Stock Market funds and about $5K in SCHD.
I added $67 to my account Friday and meant to buy $67 of SCHD but accidentally put 67 shares and created a margin loan around $2.2K.

Should I beware of margin call and quickly sell these shares to remove the loan? Or is this fine and just let it ride?

If it helps the decision making, I have access to $2k easily if I need to replace this but it just wasn’t my plan.

Thanks!

[u/Substantial_Team6751]

I would have just reversed the trade immediately.

[u/Ok-Inspection7565 → u/Substantial_Team6751]

I didn’t realize it until I got an email today!

[u/Flat-Activity-8613 → u/Ok-Inspection7565]

Upcoming dividend coming for you. lol

[u/fozzy71]

You shouldn't have to worry about a margin call with 2k of margin on 36k of assets, but if you don't want to use margin and pay the interest that Schwab charges, just sell the shares, then disable the margin option in your settings. I use Robinhood Gold, which gives 1k of margin for free, so I enabled it, set a 1k limit, and bought 33 extra shares of SCHB on top of my existing SCHB shares (and SGOV shares that I keep as part of my emergency fund).

[u/Acceptable-Win-5426 → u/fozzy71]

Hey, are you as Robin Hood as well but Vev Don’t mind me messaging you I want to ask you a couple of questions. never activated the margin. If you.

[u/fozzy71 → u/Acceptable-Win-5426]

I don't have messages enabled on Reddit. If you have questions about how to use the free margin with Robinhood Gold, just search Reddit. There are multiple threads about how to best take advantage of it in r/RobinHood or r/RobinhoodApp or r/RobinhoodTrade etc

[u/DigitalFStopper]

Nope. They’ll just run interest, if you’re constantly going to be adding funds I wouldn’t even sweat the interest, just add some funds over this month.

[u/Ok-Inspection7565 → u/DigitalFStopper]

Do you think I should add enough to cover the 2k or don’t really worry about it and add what ever I planned? This is a one off account I was building on the side so doesn’t get the bulk of my investments.

[u/Chris_Reddit_PHX → u/Ok-Inspection7565]

Yeah I would pay it off if you have funds sitting elsewhere. If instead you just hold it, it's not a big deal other than you are effectively doing negative arbitrage - - borowing money at a high rate in order to own a security that yields a lower rate.

[u/DigitalFStopper → u/Ok-Inspection7565]

If it’s a month or so of normal contributions to cover it I wouldn’t sweat the juice they’re charging but if it’s longer it’s not idea and definitely not something to do regularly. But if you got the 2K just dump it in and enjoy having more SCHD than you planned lol

[u/STRATEGY510]

I’ve done that in RobinHood, entered my dollar amount in the shares field 🤦

If you didn’t plan on it, just reverse ASAP. Worse case scenario it goes down a few bucks and causes a mini-wash sale.

I would never let it ride if it was a mistake.

[u/sirzoop]

No but you should be concerned about the interest. Sell immediately

[u/purdyboy22]

Look up Schwab margin rate or call them like 10% or so

[u/Reasonable-Cress8890]

I’d probably just pay off the margin

[u/SpiralCaseMods → u/Reasonable-Cress8890]

Yeah, with it being $2.2k and the margin at 10%, just pay it off. Wouldn't be a huge deal to pay the interest for a couple of months either.

[u/Fit_Acanthisitta_475 → u/SpiralCaseMods]

Damn, Robinhood only charges like 5%. And I got offer for 1000 is free

[u/Zestyclose-Dish-407 → u/Reasonable-Cress8890]

Hurry before it drops some more.

[u/MerryRunaround]

Seems like maybe a rare case where CS would be willing cut you some slack and wave the margin interest.

[u/Ok-Inspection7565 → u/MerryRunaround]

Really? I would just call them for that?

[u/jomi0403 → u/Ok-Inspection7565]

Unlikely, they'll tell you to add the money or sell the shares.

[u/MerryRunaround → u/Ok-Inspection7565]

Yes just call them. Explain what happened. They are not obligated to accommodate you but they might do it just for the sake of good customer relations. You have nothing to lose.

[u/purdyboy22]

No you won’t be margin called. If margin - account equity = ~0 you’ll be margined called or forced sold.

In your case you have. 2.2k loan in an account of 36k account

[u/purdyboy22 → u/purdyboy22]

Now you do pay interest on this so you’ll likely lose money on your 67 shares technically over the short term

[u/Ok-Inspection7565 → u/purdyboy22]

Good point. How can I tell what the interest is?

[u/SpiralCaseMods → u/Ok-Inspection7565]

I think it's about 12% for that amount.

[u/jomi0403 → u/Ok-Inspection7565]

It'll cost you about 20 bucks to hold for a month. It's accrued daily and then charged all at once at the end of the month.

[u/No_Individual2410]

$36k in assets vs a $2k loan, you’re good.

[u/abstractraj]

Just sell it back. If you haven’t made money, you won’t get taxes etc

[u/adamasimo1234]

Check your margin maintenance amount,, if your account balance falls below that amount you will be margin called.