Understanding How Margin Works at Alpaca Trading with Genius AI

Alpaca Trading offers innovative brokerage services compatible with the Genius AI algorithm autotrade. One of the key features offered by the Alpaca platform is the ability to trade on margin, which allows investors to increase their purchasing power and maximize their trading opportunities. Here's a detailed look at how margin works at Alpaca Trading.

Margin and Short Selling

To access margin trading or short sell, your account must have an equity of at least $2,000. If this minimum is not respected, you can only trade with 1x buying power. This only applies to stock trading, since cryptocurrency trading does not support margin trading on Alpaca.

How the Margin works

Margin trading allows you to control more stocks than you could buy with your funds alone. For example, with $10,000 in one account, Alpaca allows you to buy up to $20,000 worth of securities with a night margin of 2x. Additionally, a Pattern Day Trader (PDT) with at least $25,000 in equity can benefit from 4x leverage for intraday trading.

Initial Margin

Initial margin refers to the percentage of the purchase price of a security or a set of securities that an account holder must pay with cash available in the margin account, cash additions to the margin account, or other margined securities. Alpaca applies a minimum initial margin requirement of 50% for margined securities and 100% for non-margined securities, in accordance with Federal Reserve Regulation T.

Maintenance margin

Maintenance margin is the amount of cash or securities on margin required to continue to hold an open position. FINRA has set the minimum maintenance requirement at at least 25% of the total market value of the securities, but brokers are free to set higher requirements as part of their risk management.

Alpaca uses the following table to calculate the overnight maintenance margin applied to each security held in an account:

• LONG: share price < 2,50$ -> 100% of the market value at the end of the day
• LONG: share price >= $2.50 -> 30% of end of day market value
• LONG: ETF with 2x leverage -> 100% of the market value at the end of the day
• LONG: ETF with 3x leverage -> 100% of the market value at the end of the day
• SHORT: $2.50/share price < 5,00$ -> $2.50/share or 100% higher
• SHORT: share price >= $5.00 -> Higher by $5.00/share or 30%

Marge's calls

If your account does not meet its initial margin and maintenance requirements at the end of the day, you will receive a margin call the next morning. We will contact you and inform you of the amount of the call you will have to satisfy either by depositing new funds or by liquidating some or all of your positions to sufficiently reduce your margin requirement.

We may contact you before the end of the day and ask you to liquidate your positions immediately if your account capital is significantly less than your maintenance requirement. In addition, while we will do our best to contact you so that you can determine how to resolve your margin call, we reserve the right to liquidate your holdings in the event that we cannot reach you and the capital in your account is at risk of becoming negative.

Calculating and tracking your margin requirements all the time is a big help to avoid getting a margin call. We highly recommend that you do this if you plan to use nighttime leverage aggressively. Please use an initial 50% requirement and refer to the maintenance margin table above. Going forward, we will provide estimated real-time values of initial and maintenance margin as part of the account API to help users better manage their risks.

Interest and Borrowing Costs

Alpaca offers a competitive annual interest rate of 8.5% on margins. This rate only applies to the end of the day debit balance. Additionally, if you open short positions with easily borrowable shares (“ETB”), you will have to pay borrowing fees that are billed monthly. These fees may vary depending on short selling demand.

Genius AI Restrictions and Notifications

As part of the integration with Genius AI, users will receive a notification if a desired trade is not authorized by Alpaca Trading. This ensures that every trading decision is supported by assisted intelligence, maximizing trade security and transparency.

For questions or additional support, you can contact Genius Station at info@genius-station.com.

Credits

This article was written with information provided by Alpaca Trading and Genius Station. We thank these platforms for their continued support for innovation in automated and margin trading.