Liquidation Margin

DEFINITION of 'Liquidation Margin'

Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds a long position, the liquidation margin is equal to what the investor or trader would retain if the position was closed. If an investor or trader has a short position, the liquidation margin is equal to what the investor or trader would owe to purchase the stock or other trading instrument.

BREAKING DOWN 'Liquidation Margin'

Liquidation margin applies to investors or traders who use margin (leverage) to increase the potential profit of a trade. When the equity of a margin account falls below the liquidation margin level requirement, the broker may automatically close any open positions in the account.

RELATED TERMS
  1. Trading Margin Excess

    The funds that remain in a margin trading account that are available ...
  2. Initial Margin

    The percentage of the purchase price of securities (that can ...
  3. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin ...
  4. Buying On Margin

    The purchase of an asset by paying the margin and borrowing the ...
  5. Margin Debt

    1. The dollar value of securities purchased on margin within ...
  6. Cross Margining

    An offsetting position where market participants are able to ...
Related Articles
  1. Trading

    Buying on Margin

    When an investor buys on margin, he or she pays a portion of the stock price – called the margin -- and borrows the rest from a stockbroker. The purchased stocks then serve as collateral for ...
  2. ETFs & Mutual Funds

    Spreading The Word About Portfolio Margin

    An underused opportunity provided in an SEC rule can enhance returns and lower risk for spread traders.
  3. Trading

    Explaining Initial Margin

    Initial margin is the percentage of a stock’s price an investor must have in his account to buy that stock on margin.
  4. Markets

    Understanding the Maintenance Margin

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

    Margin Call

    Find out why a margin call is so important to investors.
  6. Trading

    Margin

    Find out exactly what margin is and why it's important.
  7. Trading

    A Guide To Day Trading On Margin

    Buying on margin is a good option if you don't have the cash to day trade.
  8. Financial Advisor

    Margin Investing Gets A Bad Rap, But For The Thrill-Seeker, It's Worth It

    Investing on margin can be profitable but it's a risky play that needs care.
  9. Markets

    The Advantages Of SPAN Margin

    Find out how it provides futures and commodity option strategists with more bang for their margin buck!
  10. Investing

    What’s a Good Profit Margin for a New Business?

    Surprisingly, the younger your company is, the better its numbers may look.
RELATED FAQS
  1. What is the difference between extensive margin and intensive margin in economics?

    Find out why it is important for traders to understand the difference between initial margin requirements and maintenance ... Read Answer >>
  2. What are my options when I get a margin call?

    Understand what a margin call means and the two primary options for meeting a margin call, such as depositing additional ... Read Answer >>
  3. How much can I borrow with a margin account?

    Understand the basics of margin accounts and buying on margin, including what amount investors can typically borrow for purchases ... Read Answer >>
  4. What does it mean when I get a maintenance margin call?

    Understand how maintenance margin calls work, and learn about how margin requirements are different for trading stock versus ... Read Answer >>
  5. What is the interest rate offered on a typical margin account?

    Learn about the basics of trading on margin accounts, specifically the rate of interest that is typically charged for margin ... Read Answer >>
  6. Do you have to sell your stocks when you get a margin call?

    Understand the implications of a margin call and what an investor's options are when the stock he purchased on margin falls ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center