Cash Accounts Versus Margin Accounts...

[Vegas]

Pro's and Con's... Thoughts...

[Dzielak51]

Pros:  Allows Funds to settle immediately after sale for reuse. You can leverage your investment by doubling your money with the money they let you borrow.

Cons:  They charge a small interest rate.  If trade goes against you, you could be required to deposit fund.  They will sell your position if you dont maintain margin requirements.

I have both Margin and non margin accounts.  I personally like margin better as long as you dont neglect it.

[Shali]

Pros: 1) You're not waiting around for funds to settle in order to trade. 2) You can short. 3) You can use the margin but you don't have to.

Cons: 1) If you use the margin and the trade goes against you, it can be problematic.

My solution: have it but don't use it.


P.S. I don't have a problem using the 4x margin in a day trading acct. but that's a different matter, as you're not holding overnight.

[ShyTrader]

Like Shali commented, the best reason to have margin is because your funds are immediately available after you sell. In today's market and with the current economic conditions, I second his comment about having a margin account and NOT using the borrowing option. It is nice to be able to day trade and use unsettled funds if you want to.

Questions I wondered about when I first had a margin account.

1. You are NOT charged (interest) to use unsettled funds in a transaction.
2. You CANNOT buy every stock with unsettled funds. I have found you cannot by a lot of pink sheets with unsettled funds, but you can buy MOST of the stocks in the other markets.
3. There is a limit for how much money you have have in unsettled funds. I do not day trade that much, but I think it is 3 or 4 times your account value.
4. You can have a margin account as a retirement account. The catch is that it works more like a cash account because many of the options are disabled. Basically I am allowed to buy/sell with unsettled funds, but if I do my account is treated as cash for the next 90 days. I look at it like if I get in trouble I can get out, and then I have to play by the rules and be more careful for the next 90 days. I think it's kind-a dumb, but it works to help me out of a jam, so I am not going to say anything.

Hope that helps a little more.

[Dzielak51]

Shy, i have a IRA account with Scottrade that is not margin able

[ShyTrader]

I have an IRA with Etrade, and it is listed as a margin. It is weird cause you cannot "barrow money" with any retirement account, and they will NOT let me do that.

It's kinda weird they they allow it to be listed like that, and I cannot day trade with it, at least NOT past 1 transaction (or maybe more than 1 day every 91 days). Seems contradictory, but it is really listed that way.