Robinhood remains wary of the expected surge in market volatility heading into the hotly contested U.S presidential election. The retail trading platform has asked users to raise their cash reserves on several widely held stocks. The app is poised to hike its margin-maintenance requirements on stocks affected by election-related volatility.
Margin Call Requirements
The commission-free stock trading app has risen the ranks to become one of the biggest apps for trading the markets on making it easy for traders to invest in margins. The use of margin has allowed traders to borrow money as loans to buy stock and options, thus boost investment gains.
Faced with increased volatility levels that continue to trigger wild swings, the retail trading app has confirmed it could issue margin calls once users fall short of the minimum. Anyone who fails to resolve their margin call face the risk of some of their stock holdings sold to cover the call.
It is not unusual for stockbrokers to alter margin requirements as market volatility increases. This is in part because most of the traders rack up so many losses than their invested capital can cover. Just like other market providers, Robinhood continuously monitors and adjusts market requirements based on the level of volatility.
The push to alter margin requirements comes hot on the heels of reports that hackers did gain access to almost 2,000 accounts on the Robinhood platform. The company was forced to send users notification urging them to use the two-factor authentication mode to protect their accounts from unwarranted access.
Amid the security concerns, Robinhood has continued to grow in popularity in pioneering commission-free stock and ETF trading. Its popularity has grown tremendously in the aftermath of the COVID-19 pandemic that saw an influx of people flocking the market to bet on stocks. The app currently plays hosts to more than 13 million users. Conversely, the startup has seen its value surge to highs of $12 billion.