Initial Margin

AAA

DEFINITION of 'Initial Margin'

The percentage of the purchase price of securities (that can be purchased on margin) that the investor must pay for with his or her own cash or marginable securities.

Also called the "initital margin requirement."

BREAKING DOWN 'Initial Margin'

According to Regulation T of the Federal Reserve Board, the initial margin is currently 50%. This level is only a minimum and some brokerages require you to deposit more than 50%.

For futures contracts, initial margin requirements are set by the exchange.

RELATED TERMS
  1. Call Loan Rate

    The short term interest rate charged by banks on loans extended ...
  2. Margin

    1. Borrowed money that is used to purchase securities. This practice ...
  3. Current Market Value - CMV

    The resale valuation attached to a security held long in an investor's ...
  4. Call Loan

    A loan provided to a brokerage firm and used to finance margin ...
  5. Leverage

    1. The use of various financial instruments or borrowed capital, ...
  6. Federal Reserve Board - FRB

    The governing body of the Federal Reserve System. The seven members ...
Related Articles
  1. Options & Futures

    Introduction To Single Stock Futures

    These contracts allow for easier shorting, and provide more leverage and flexibility than stocks.
  2. Options & Futures

    Leveraged Investment Showdown

    Margin loans, futures and ETF options can all mean better returns, but which one should you pick?
  3. Investing News

    Timing of the Fed Interest Rates Hike

    Until the beginning of August, Fed watchers expected the central bank to raise rates in September. However, recent news pertaining to China’s slowing economy and its devaluation of the yuan have ...
  4. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  5. Stock Analysis

    How Rollins Inc. Transformed from Radio to Pest Control

    Discover how Rollins, Inc. grew and expanded, making numerous acquisitions, transitioning from the radio industry to the pest control industry.
  6. Term

    Understanding the Maintenance Margin

    A maintenance margin is the minimum amount of equity that must be kept in a margin account.
  7. Economics

    What are the Federal Reserve Chairman's responsibilities?

    Learn about the duties and responsibilities of the chairman of the Federal Reserve Board, including testifying before Congress and as chair of the FOMC.
  8. Investing Basics

    Explaining Forward Rate Agreements

    Forward rate agreement (FRA) refers to an interest rate or foreign exchange hedging strategy.
  9. Economics

    Understanding the Bank Rate

    Bank rate is a term describing the interest rate a country’s central bank charges its domestic banks on loans it makes to them.
  10. Options & Futures

    An Introduction To Value at Risk (VAR)

    Volatility is not the only way to measure risk. Learn about the "new science of risk management".
RELATED FAQS
  1. What does a futures contract cost?

    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>
  2. What are my options when I get a margin call?

    The two options available to an investor when he receives a margin call are to deposit additional funds to his trading account ... Read Full Answer >>
  3. What does it mean when I get a maintenance margin call?

    A maintenance margin call is a requirement to place more money into an account that is trading on margin to hold the current ... Read Full Answer >>
  4. Why does the Federal Reserve Board regulate which stocks can be bought on margin?

    One of the popular early explanations for the stock market crash in 1929 was that unregulated margin trading made the financial ... Read Full Answer >>
  5. What is the difference between extensive margin and intensive margin in economics?

    Trading on margin is not commonly done in stock trading except by professional investors and institutional traders. However, ... Read Full Answer >>
  6. What are the minimum margin requirements for a short sale account?

    In a short sale transaction, the investor borrows shares and sells them on the market in the hope that the share price will ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  2. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  3. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  4. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  5. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  6. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!