TradeStation Margin Interest Rates

TradeStation Margin Rates

Debit Balance Margin Rate
under $25,000 8.50%
$25,000 - $49,999.99 8.25%
$50,000 - $249,999.99 7.75%
$250,000 - $999,999 7.25%
$1,000,000 - $9,999,999 6.75%
above $10,000,000 6.25%

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TradeStation margin rates are as of 2017 and are subject to change. For the most recent information on TradeStation margin interest rates visit their website:

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Buying Puts

Suppose you look at XYZ stock and think to yourself, “Now there’s a train wreck waiting to happen.” You can see that the price is going down soon -- but how can you make a profit when a stock loses value?

A put option allows you to do just that. It’s basically buying a call option in reverse. Let’s say that XYZ stock is trading for $10 a share in June. You just know in your bones that it’s going to tank by August. You buy the XYZ August $12.50 put option for $2 a contract. Your $200 now buys you the right to sell, or put, 100 shares of XYZ, at $12.50 a share, anytime before the third Friday in August. You do this because you fully expect it to drop like a stone – possibly all the way down to zero.

Let’s say you were right on the money. XYZ is a dog and falls to $5 a share. You can exercise the put and sell 100 shares of XYZ at $12.50 – then buy 100 shares of XYZ at the current price of $5 for a profit of $7.50 per share, minus the $200 you paid for the option, and commissions. Unlike a call option, in which you first buy and then sell, those who exercise put options sell the stock first -- and then buy the stock back at a lower price to complete the transaction. If you don’t want to hassle with buying and selling stock, you may simply choose to sell the put options, which rose in value when the price of the underlying stock fell.

But here’s the corresponding risk: say you buy one XYZ August $12.50 put contract at $2. A week later XYZ shoots up to $15 a share. You’re now in the red, and your losses only mount as XYZ continues to climb. You must then sell your put option at a loss or let the contract expire worthless

Buying Call Options

Let’s say it’s June, XYZ is trading at $10 a share and you think it will go much higher by August. You don’t have the money to buy 100 XYZ stock shares at $10 a share, but the XYZ August 12.50 options calls are selling for $2 a contract. You see that one options contract controls 100 shares of stock. You choose to buy one XYZ August $12.50 call option at $2 a contract. You pay $200 -- $2 x 100 shares.

Your $200 buys you the right to buy 100 shares of XYZ stock at $12.50 a share anytime between now and the third Friday in August, when your contract will expire.

A week later XYZ stock shoots up to $16 a share. Congratulations! Do you exercise your option now and buy 100 shares of XYZ stock at $12.50 a share? Usually not. Wouldn’t you be making a profit? Yes – barely. You’d be making $350, minus the $200 you paid for the options, minus commissions for the stock trades. But why do all that -- look at the price of your XYZ options! They’ve also risen – let’s say, to $4 a contract – $400 minus the $200 you paid for the options = $200 profit in one week!

You see, when the underlying stocks rise in price, the value of your call options usually rise as well – and since the options cost far less, you can afford to load up on them. Translation: Options can make you a lot of money, very quickly, with only a small initial investment. But only if the price of the call option rises high enough – and within the timeframe you chose!

Here’s the other potential call option scenario, this one not so pretty: You choose to buy one XYZ August $12.50 option contract at $2 a contract. You pay $200. The price of XYZ stock plunges to $5 a share – far below your strike price. It stays there well into July. You’re now faced with a hard choice – sell your options for a big loss while you still can, or ride it out, hoping that the stock will rebound. If you still hold your contract on the third Friday in August, it will expire worthless – and you’ve lost the whole $200!

This possibility is why many brokerage firms advise their novice clients to avoid options trading – at least until they learn enough to assume these risks knowledgeably.

Updated on 6/21/2017.

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