# Calculating Margins

Placing trades can feel overwhelming if you don’t understand **the importance of calculating margin**. A margin allows you to buy securities by borrowing money. The margin is the difference between the market value of a stock and the loan amount. Check out the sections below to see how **TD offers helpful tips** to understand margin calculations so you can **better predict profits and losses** and become a more confident, skilled investor.

## Learn how to calculate margin

### **Calculating Margin Requirements**

To calculate the margin required for a long stock purchase, multiply the number of shares X the price X the margin rate. The margin requirement for a short sale is the regular margin requirement plus 100% of the value of the security.

**Margin Requirement = shares x price x margin rate percentage**

**Examples:**

### Long Stock

Purchase 1,000 shares of a stock at $50 with margin rate of 30%. The margin requirement would be:

1,000 shares x $50 x 30% margin rate = $15,000

This is the minimum required amount of cash or excess margin that must be in the account before a buy order can be entered.

Since 30% is the margin rate, TD Direct Investing is lending the account holder 70% of the trade value.

Maximum loan value is 1,000 shares x $50 x 70% = $35,000

### Short Stock

Short sell 500 shares of a 50% marginable stock priced at $10.00. The margin requirement is 150%. Note: 100% of the margin requirement is generated from the sale of the security. Therefore, the additional initial margin requirement is 50%, the same amount required in order to accept the trade if you were purchasing the stock.

500 shares x $10.00 x 50% = $2,500

The total margin requirement to hold the position, including the 100% of the proceeds from the short sell, is calculated as follows:

500 share x 10.00 x 150% = $7,500

(Note: TD Direct Investing does not pay interest on the cash proceeds of the short sale.)

### Expand ** Maintaining Adequate Margin**

### Expand ** Calculating Maximum Trade Size from Margin Excess**

### Expand ** Calculating Maximum Trade Value at Different Margin**

Rates for $5,000 Excess Margin

Rates for $5,000 Excess Margin