Portfolio Margin

Portfolio Margin is a method available for certain accounts for computing required margin for stock and option positions that is based on the risk of the position rather than the fixed percentages of Regulation T and strategy-based margin. This method uses theoretical pricing models to calculate the loss of a position at different price points above and below current stock or index price. The largest loss identified is the margin required of the position. The result is often lower margin requirements than would be calculated from the standard method.

Stocks, options, small cap broad-based indices, and large cap broad-based indices are all tested with a minimum +/- 15% price change. The range is divided into ten equidistant points, and the loss/gain on the position as a whole is calculated at each of the ten points (scenarios). Stress testing is done on a position’s implied volatility and the margin requirement will be the largest loss calculated on any given scenario. Thus, hedged positions may have lower requirements than non-hedged positions. However, positions that are concentrated will be evaluated using a greater range and thus the requirement on these positions will be greater in comparison to a non-concentrated position.

In the event a portfolio margin account falls below $100,000 Net Liquidating Value; the account holder will have to bring the account above this watermark or it will be removed from the portfolio margining system.

Portfolio Margin Minimum Requirements

Each account must have an initial net liquidating value of at least $125,000
Smaller accounts cannot be combined to meet the $125,000 requirement
Available only to margin (non-IRA) accounts
Each account must be approved to trade short, uncovered options

Important Information About Portfolio Margin

Use of portfolio margin involves unique and significant risks, including increased leverage, which increases the amount of potential loss, and shortened and stricter time frames for meeting deficiencies, which increase the risk of involuntary liquidation. Client, account, and position eligibility requirements exist, and approval is not guaranteed. Carefully read the Charles Schwab & Co. Guide to Margin and the Charles Schwab & Co. Margin Overview and Disclosure Statement for specific disclosures and more details.

It is the client’s obligation to evaluate the risks of portfolio margin when making investment decisions. Charles Schwab & Co. (Schwab) reserves the right at its sole discretion to decline a client the use of portfolio margin. In the event Schwab decides to terminate a client’s use of portfolio margin, the client’s account may be converted to the standard margin account. The conversion of a portfolio margin account to a margin account may require the liquidation of positions. Uncovered options strategies are only appropriate for traders with the highest risk tolerance, involve potential for unlimited risk, and are only allowed in margin account.

Exchange Codes Risk-Based Concentration (RBC) Margin System: How It Works

The information here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The type of securities and investment strategies mentioned may not be suitable for everyone. Each investor needs to review a security transaction for his or her own particular situation.
Market volatility, volume and system availability may delay account access and trade executions.

Investing involves risk including loss of principal. Past performance of a security or strategy is no guarantee of future results or investing success.

Trading stocks, options, futures and forex involves speculation, and the risk of loss can be substantial. Clients must consider all relevant risk factors, including their own personal financial situation, before trading. Trading foreign exchange on margin carries a high level of risk, as well as its own unique risk factors.

Options carry a high level of risk and are not suitable for all investors. Certain requirements must be met to trade options through Schwab. Please read the options disclosure document titled "Characteristics and Risks of Standardized Options." Supporting documentation for any claims or statistical information is available upon request.

Multiple leg options strategies will involve multiple commissions.

Forex trading involves leverage, carries a high level of risk and is not suitable for all investors. Please read the NFA booklet Trading Forex: What Investors Need to Know prior to trading forex products.

Commodity interests and cash in futures accounts are not protected by SIPC. Futures trading involves a high level of risk and is not suitable for all investors. Certain requirements must be met to trade futures. Please read Risk Disclosure Statement for Futures and Options before considering any futures transactions.

Access to real-time market data is conditioned on acceptance of the exchange agreements. Professional access differs and subscription fees may apply.

Futures, futures options, and forex trading services provided by Charles Schwab Futures & Forex LLC. Trading privileges subject to review and approval. Not all clients will qualify.

Charles Schwab Futures and Forex LLC, a CFTC-registered Futures Commission Merchant and NFA Forex Dealer Member. Charles Schwab Futures and Forex LLC is a subsidiary of The Charles Schwab Corporation.

This site is designed for U.S. residents. Non-U.S. residents are subject to country-specific restrictions. Learn more about our services for non-U.S. residents.