What is Gold Buying Power, and what are the benefits?
Gold Buying Power -- it’s money that we lend to you to buy stocks in the stock market. You can invest more, and keep any profits. It also gives you flexibility with your cash: if you see an opportunity and want to invest more, you can right away without depositing from your bank. And if you need to withdraw some cash from your account for day-to-day spending, you can use Gold buying power to keep the stocks you’ve got and not have to sell.
Do I get charged interest on top of the monthly charge for using Gold buying power?
No! You will not get charged interest or fees in addition to the fixed monthly charge of the tier you selected. We created a flat, once-per-month pricing structure to help make the cost of using leverage easier to understand. So rather than starting with an interest rate, and working out how long you may end up holding stocks purchased with Gold, you know exactly how much you’re spending up front. Pay once per month and you’re done. And of course, trades are commission-free. Always and forever.
How do I know when I’ve used Gold buying power rather than cash?
Gold Buying Power kicks in only once you’ve fully invested the cash in your account. That means even if you’ve upgraded to Robinhood Gold, but you’ve still got some cash that’s not invested in stock, you won’t be using Gold Buying Power. Once you’ve bought your first shares with Gold, we’ll update your Account Settings to show what percentage of the total value of stocks came from Gold Buying Power.
Let’s go over a simple example to illustrate this point. Suppose you have $3000 in your account – with $2800 in stocks and $200 cash– when you upgrade to Robinhood Gold with $2000 in added buying power. Using your shiny, new account, suppose you buy an additional $1000 of stock MEOW; under the hood, we’ll use the $200 in cash you had first, then use $800 in Gold Buying Power.
Is it possible to stop using Gold Buying Power by selling the shares I bought with it?
Yes, but that’s not the only way. It’s important to understand that Gold Buying Power is a feature of your account as a whole, not just the individual shares of stock you’ve purchased with it.
Let’s use the example from above to illustrate this point. So far, you’ve used $800 of Gold Buying Power when you bought shares of MEOW. Yes, you can sell $800 of MEOW shares to stop using Gold Buying Power. But, let’s say you also own $800 of another stock CATZ. If instead you sold those shares of CATZ, we’d use $800 in proceeds to pay back the Gold Buying Power too. In either case, you would also no longer be using Gold Buying Power.
I can’t use my full Gold buying power when buying a stock. Why?
You can use your full Gold buying power when buying stocks, though sometimes you can’t invest it all in one, single stock. Let’s explain. This is because US federal laws require all brokerages, including Robinhood, to have common-sense safeguards to prevent customers from losing too much money on a single, high-risk investment. Some examples where you can’t use your full Gold buying power on a single stock include leveraged ETFs (which are already leveraged) and newly-IPOed stocks (which can go up and down in price very quickly), stocks priced at less than $3.00 per share (these securities are at greater risk of getting de-listed), and others.
We recommend you keep track of how much of your Gold buying power you can invest in a given stock by checking its detail page.
The app says I have Gold Withheld. What is that?
Gold withheld is a side effect of the regulatory safeguards that are in place to protect users, brokerages, and the market. Gold withheld can happen for a few reasons:
Your portfolio value drops below your selected tier.
By law, Robinhood can only extend up to double your portfolio value in Gold Buying Power. If your portfolio value drops below your tier, some of your Gold Buying Power will be in Gold Withheld until your portfolio value goes back up.
You’re investing in high volatility stocks.
By law, Robinhood can only extend a certain amount of Gold Buying Power for each stock. You’ll get more buying power for low volatility stocks than medium or high volatility stocks. Any Gold Buying Power unavailable due to medium or high volatility stocks will be in Gold Withheld.
High volatility stocks will decrease the amount of Day trade buying power that you are issued at the start of the day.
You may be restricted on the amount that you are able to sell when you purchase a high volatility stock. This is to prevent you from placing a day trade greater than your day trade buying power. Placing a day trade greater than your day trade buying power will result in a violation and may require you to make an additional deposit to keep trading.
Can I increase the Gold buying power in my account?
Yes, you can increase the amount of Gold buying power you’re eligible for by increasing the cash deposit in your account. Federal laws require all brokerages, including Robinhood, to offer at most 2x your cash account value in Gold buying power. So, for example, if you have $2000 in your account, you can get at most $2000 in Gold Buying Power. But if you increase your account value to $3000 by depositing $1000, you can get at most $3000 in Gold Buying Power.
You can change your Robinhood Gold tier at any time in the app by going to Settings -> Gold -> Change Tier. See “Gold Tier Examples” for more information.
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What is Margin?
Margin lets you buy stocks with borrowed funds from your broker, similar to your credit card with your bank.
Robinhood Gold is powered by margin accounts; this allows us to increase your buying power by up to 2x and immediately give you access to your funds after you sell stock. We’ve worked hard to make the experience of using it seamless, cost-effective, and most importantly, understandable.
What are the risks of Margin?
Buying stocks using margin amplifies the gains and losses in your portfolio. This means the more Gold Buying Power you use, the more your portfolio value will rise or fall. You can keep any profits, but you will also be responsible for any losses.
What is Margin Maintenance?
Margin maintenance is the minimum portfolio value you need to maintain before you are at risk of borrowing more money than you have in your account. You can see your margin maintenance in your account settings. Your margin maintenance can vary based on the volatility of the stocks you own. See “Margin Maintenance Examples” for more information.
What can I do to avoid a margin call?
The best way to avoid a margin call is to stay informed about what’s going on with the stocks you’ve bought with Gold buying power, and making the relevant information easy to understand was our top priority when designing Robinhood Gold.
You can check whether you are approaching a margin call by checking the “Gold Health” section of your Account Settings. Here, you’ll see how much value your account can lose before you would get a margin call. A simple heuristic is that you want this number to stay positive, the bigger the better. We’ll also send updates if you account happens to get close; in those situations, reacting sooner is better.
I have negative buying power, what does it mean?
If your portfolio value drops below your initial margin requirement, your account will display negative buying power. This doesn’t necessarily mean that you’re in a margin call, but you need positive buying power to buy stocks. To increase your buying power, deposit funds, sell stocks, or wait for your portfolio value to rise above your initial margin requirement.
If your buying power is -$50.00, depositing $100.00 will leave you with +$50.00 of buying power. With Robinhood Gold, the amount of stock you can buy is dependent on the total value of all the stocks that you hold. In general, you’ll get more buying power if your stocks are going up than if they’re falling.
What do I do if I get a margin call?
You have two simple ways of resolving a margin call.
First, you can deposit additional funds from your bank to increase your account value. This allows you to hold your stocks and allow them to potentially rebound.
Alternatively, you can sell some of your shares, and we’ll use the proceeds from the sale to cover your margin call. This allows you to avoid depositing funds.
With Robinhood Gold, you get up to 2x your normal buying power. This means you can buy up to twice as much stock and keep the profits. You can pick the amount of additional buying power you want when you’re signing up for Gold.
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I covered my margin call, but I still can’t buy stocks?
Covering a margin call means that you’ve sold enough stock or deposited enough funds to get above your margin maintenance. A margin call isn’t fully resolved until you close a trading day with a portfolio value above your margin maintenance. This means you can’t buy stocks on the day you cover your margin call.
Margin Maintenance Examples
Your additional buying power depends on a number of factors including portfolio value, Gold tier, and margin maintenance. Certain low-priced and highly volatile stocks may add less additional buying power to reduce risk and abide by regulatory requirements. In general, the less volatile the stock, the more additional buying power you will be able to use for that stock. You can learn more about the regulatory requirements here.
Ex 1: Low Volatility Stock
You have $5,000 in cash and hold no positions. You are given an additional $5,000 in buying power from Gold for a total buying power of $10,000.
ABC is trading at $20.00 per share and has a stock maintenance requirement of 25%. This means a $10,000 purchase would require $2,500 ($10,000 x 0.25) in account value. You will be able to use all $10,000 of buying power to purchase 500 ABC at $20.00 per share.
Ex 2: High Volatility Stock
You have $10,000 in cash and hold no positions. You are given an additional $10,000 in buying power from Gold for a total buying power of $20,000.
XYZ is trading at $50.00 per share and has a stock initial requirement of 75%. This means a $20,000 purchase would require $15,000 ($20,000 x 0.75) in account value. You will not be able to use all $20,000 of buying power to purchase XYZ since your account value is lower than the stock maintenance requirement.
Gold Tier Examples
Ex 1: You are on a $4,000 tier that is $20.00/mo
You’re 15 days into the month and you’re only using $2,000.00 of your Gold Buying Power. You decide to downgrade to a $2,000 tier that is $10.00/mo. You’ll have $10.00 of credit for the remaining 15 days that you’ve already paid for, and you’ll immediately be downgraded to the $2,000 tier. Your $10.00 credit will cover your first month’s fee, and you will be charged $10.00 each following month.
Ex 2: You are on a $6,000 tier that is $30.00/mo
You’re 20 days into the month and you’re using all $6,000 of your Gold Buying Power. You decide to downgrade to a $2,000 tier that is $10.00/mo. You must return $4,000 of Gold Buying Power to downgrade to the $2,000 tier by depositing funds or selling stock.
You’ll have $10.00 of credit from the remaining 10 days that you’ve already paid for, and you’ll immediately be downgraded to the $2,000 tier. Your $10.00 credit will cover your first month’s fee, and you will be charged $10.00 each following month.
Ex 3: You’re on a $4,000 tier that is $20.00/mo
You’re 15 days into the month and you decide to upgrade to the $10,000 $50.00/mo tier. You’ll have $10.00 of credit from the remaining 15 days that you’ve already paid for, and you’ll be immediately upgraded to the $10,000.00 tier. There will be a $40.00 charge for the first month and a $50.00 charge each following month.
Ex 4: You’re on a $6,000 tier that is $30.00/mo
You’re 20 days into the month and you decide to upgrade to the $10,000 $50.00/mo tier. You’ll have $10.00 of credit for the remaining 10 days that you’ve already paid for, and you’ll be immediately be upgraded to the $10,000.00 tier. There will be a $40.00 charge for the rest of the month and a $50.00 charge each following month.
Tiers you are offered depend on your current portfolio value. If you want to upgrade to a higher tier with more added buying power, you’ll need to make a deposit. You cannot downgrade until you’re using less Gold Buying Power than the tier you’re downgrading to. You can return your Gold Buying Power by depositing funds or selling stock. When you change tiers, your billing cycle will restart, and your remaining credit from that month’s payment is applied to your future billing cycles. If you want to pick a tier that isn’t shown, you can contact firstname.lastname@example.org for help.
*Additional buying power over $50,000.00 has a yearly interest rate of 5.0%.