Margin Buying Power

What are the different types of margin buying power?

Buying power refers to the total amount available to purchase securities, including both cash and any available margin in a brokerage account. In margin accounts, there are two main types of buying power:

Day Trading Buying Power (DTBP)

Leverage: 4× your Margin Excess

• Profits from day trades are added to your cash balance immediately but do not increase DTBP intraday. These profits will be reflected in DTBP on the next trading day.
• If you begin the day by liquidating positions held overnight, DTBP is replenished based on the lower of the previous day’s closing price or the sale price
• If DTBP is overspent, you may receive a Day Trade (DT) call the follow trading day

Overnight Buying Power (ONBP)

Leverage: 2× the lesser of the SMA or Margin Excess

• ONBP is the amount available to purchase securities intended to be held overnight.
• After liquidating an overnight position, ONBP is replenished by the sale proceeds, adjusted based on the maintenance requirement of the position sold.
• Holding positions that exceed your ONBP through 8:00 PM ET can result in Regulation T (RT) Call the following trading day

How do I calculate the margin buying power required for a trade?

To calculate the required buying power, divide the total trade amount by the leverage allowed on the stock.

Formula:

Required Buying Power = Trade Amount ÷ Leverage

Example (using 1.67x leverage):

$10,000 ÷ 1.67 = $5,988 required buying power

This is based on a 60% margin requirement, which means you must cover 60% of the trade, while your broker lends the remaining 40%.

Why 60%?

Margin Requirement = 1 ÷ Leverage

1 ÷ 1.67 ≈ 0.60, or 60%

How much stock can I buy with my available margin buying power?

To calculate the maximum trade size based on your buying power, multiply your available buying power by the leverage.

Formula:

Max Trade Size = Margin Excess × Leverage

Example:

If you have $6,000 in Margin Excess:

$6,000 × 1.67 = $10,020 max trade size

This allows you to use leverage to increase your buying power beyond the cash you have available.