The article covers the topic of margin trading account and how to enable/disable margin trading.
When applying for a Euro Pacific Trader account, you can choose two account types: Cash Account or Margin Account. We compare the two account types below.
Most clients select the standard account type called a Cash Account. Cash Accounts have several limitations:
- Cannot borrow to buy stock, write uncovered options, sell stock short or maintaining certain option spreads.
- Cannot transact with unsettled funds.
- Cannot maintain short balance in any currency. The account will be required to convert funds prior to transacting in products denominated in a currency you do not hold.
- Subject to forced liquidation if insufficient cash to satisfy fees (e.g. market data or news subscription fees).
Margin Trading is simply borrowing cash to buy a security.
If you request to enable Margin Trading, please note that it comes with a host of risks and costs, one of them being the platform automatically creating a margin loan when buying a security denominated in a currency that you do not have available, leading to interest charges.
For most trading clients, margin obligations are calculated by a defined formula and applied to each “marginable” financial instrument. To read more about this formula, please read our Interest & Financing page.