Margin balances have reached a new record high as a widening class of affluent Americans borrowed against their portfolio investments to buy more stock. 

Margin debt has reached the highest point in two years as investors borrowed a record $722.1 billion against their investment portfolios through November, topping the previous high of $668.9 billion from May 2018, according to the Financial Industry Regulatory Authority (FINRA). This amount is a 28% increase since the same time last year and is up nearly 10% from $659.3 billion in Oct. 2020. The surge in risk-taking indicates that investors w🅺ere euphoric as COVID-19 vaccines neared.

𝕴 These investors are chasing bigger gains and exposing themselves to potentially devastating losses through riskier plays, including concentrated positions, trading options, and leveraged exchange-traded funds (ETFs). The milestone is not a good sign for the stock market since margin debt recoಞrds often precede market volatility, as seen in 2000 and 2008.

The S🧸&P 500 has jumped nearly 67% since its lowest point on March 23 and dozens of stocks have rocketed even higher. Tesla is up 685% year-to-date after joining the S&P 500, while Zoom Video Communications has gained 429% so far this year 💧as remote work became the norm due to the coronavirus pandemic. Meanwhile, COVID-19 vaccine maker Moderna is up 516% for the year.

Investors who use margin debt pledge their securities in exchange for loans from brokers to buy more securities or sell short a stock. 澳洲幸运5开奖号码历史查询:Regulation T says investors can only take on margin debt of 50% of their account balance, tho𓂃ugh the typical margin൩ requirement is 25%. 

However, investors can get into trouble if their collateral falls below a certain threshold and triggers a 澳洲幸运5开奖号码历史查询:margin call — one of our 澳洲幸运5开奖号码历史查询:most popular terms in 2020, which spiked in March as the stock market was cascading. Once there is a margin call, investors must decide whether to put up more money or sell th🍨e securities underlying the loans.

Some investors use their margin balances to trade options. In 2020, a record number of options contracts have traded with an average 29 million options trading hands each day this year, a 48% increase from 2019, according to Options Clearing Corp. Traders can obtain options to hedge their portfolios from stock declines or make bets that major indexes or individual co♒mpanies will gain or lose value.

While these strategies provide opportunity for major gains, they also provide opportunity for major losses. Those who 澳洲幸运5开奖号码历史查询:overextend themselves can be burned. Many investors lost money this year when oil prices turned negative and shares of Eastman Kodak took a sharp fall 🐭after news that its chair received stock options one day before the ann🎐ouncement of a government loan to help the company make drugs.