how non marginable securities work
the main goal of keeping some securities away from margin investors is to mitigate risk and control the administrative costs of excessive margin calls on what are usually volatile stocks with uncertain cash flows examples of non marginable securities include recent initial public offerings ipos when a news outlet reports a company is making the first ever offer to sell shares to the public this is known as an ipo over the counter bulletin board stocks and penny stocks which are stocks that generally trade per share for under 5 and are owned by small companies are also non marginable securities by decree of the federal reserve board other securities such as stocks with share prices that are under 5 or that are extremely volatile may be excluded at the discretion of the broker some low volume securities also aren t marginable marginable vs non marginable securitiesmarginable securities are those that can be posted as collateral in a margin account the balance of these securities can count toward the initial margin and maintenance margin requirements margin securities allow you to borrow against them however non marginable securities can t be pledged as collateral in a brokerage margin account the downside of marginable securities is that they can lead to the aforementioned margin calls which can include the unexpected liquidation of securities marginable securities can amplify returns but they may also exacerbate losses example of non marginable securitiescharles schwab sets its margin requirements so that certain securities are not marginable schwab allows most stocks and etfs as marginable securities as long as the share price is 3 or higher as well mutual funds are allowed if they re owned for more than 30 days as are investment grade corporate treasury municipal and government bonds ipos above a certain volatility level are not marginable however ipos are marginable if they are purchased one business day after the ipo on the secondary exchange special considerationsnon marginable securities have a 100 margin requirement but certain stocks have special margin requirements however the stocks with special margin requirements are marginable but they have a higher margin requirement than typical stocks and the minimum required by brokers for example charles schwab typically requires an initial maintenance margin of 30 for certain volatile stocks the initial maintenance margin is higher these stocks include amc entertainment amc which has a special maintenance margin of 100 on long positions and 200 on short positions gamestop gme meanwhile has a unique maintenance margin of 100 on long positions and 300 on short positionsinvestopedia does not provide tax investment or financial services and advice the information is presented without consideration of the investment objectives risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors investing involves risk including the possible loss of principal 