Why is my cash balance negative?

I noticed today that my buying power is positive but my cash balance shows negative in the Alpaca dashboard. This confuses me very much as I never did a short call and all my positions are positive. How come that my cash is being negative then?

When I check the Balance sheet I can see that my “Cash Withdrawable” is even positive. How can it be possible that I am allowed to withdraw money when my Cash balance is negative?

@bennycode The reason the account has a negative cash balance is that you’ve used ‘margin’. You have effectively borrowed cash to purchase some securities. There is info in the docs on how that works.

Alpaca, and most brokers, will lend you cash to buy securities if you don’t have enough cash in your account. The initial amount that a broker can lend is called “initial margin” or sometimes “RegT margin”. The SEC limits the amount a broker can lend to be equal to the value of the securities held (and in some cases less). The broker feels rather confident lending the cash because they hold your securities and effectively use those securities as collateral on the loan.

Cash is really just an accounting construct and can be very misleading. While it is completely correct, it isn’t always useful. So first, two rules. Rule 1) buys always reduce cash and Rule 2) sells always increase cash. It’s really as simple as that. With that then, here is a simple example for how cash can become negative.

cash: $10,000
holdings: $0
equity: $10,000

buy $10,000 of stock XYZ
cash: $0
holdings: $10,000
equity: $10,000

buy $5000 of stock ABC
cash -$5000 (remember buys always reduce cash)
holdings: $15,000
equity: $10,000 (equity remains the same and is cash+holdings)

In the above example, there wasn’t enough cash in the account to buy ABC but the broker lends (“on margin”) the $5000. Cash get’s subtracted (because it’s a buy) and therefore cash goes negative -$5000.

As soon as you sell some securities (remember sells always add to cash) the cash would increase and potentially go above $0.

Does that make sense?

Yes it makes sense but I didn’t know that I borrowed cash. Can I sign out of this feature?

Right now, I have -3000 USD in cash, but I can withdraw 5000 USD. How is this possible? Am I withdrawing borrowed money on which I might have to pay interest?