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The Trade Busters
18 – Stock Margin vs. Options Margin
Aug 7, 2021
Discover the differences between stock margin and options margin, how they involve borrowing money, and how options offer leverage without the need for borrowing in this informative episode.
12:50
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Quick takeaways
- Stock margin involves borrowing money for shares, options margin leverages without cash borrowing.
- Combining stocks with options allows increased notional exposure and leverage using marginable assets.
Deep dives
Difference Between Stock Margin and Options Margin
Stock margin involves borrowing money to purchase additional shares beyond your account balance, necessitating payment of margin interest. In contrast, options margin is about brokers holding less collateral or buying power relative to the notional value of the instrument traded, resulting in leverage without cash borrowing. Notional exposure differs significantly between the two, with stock margin leveraging the account balance, while options margin leverages the capital put up.
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