Margin
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Definition of 'Margin'1. Borrowed money that is used to purchase securities. This practice is referred to as "buying on margin".2. The amount of equity contributed by a customer as a percentage of the current market value of the securities held in a margin account. 3. In a general business context, the difference between a product's (or service's) selling price and the cost of production. 4. The portion of the interest rate on an adjustable-rate mortgage that is over and above the adjustment-index rate. This portion is retained as profit by the lender. |
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Investopedia explains 'Margin'1. Buying with borrowed money can be extremely risky because both gains and losses are amplified. That is, while the potential for greater profit exists, this comes at a hefty price - the potential for greater losses. Margin also subjects the investor to a number of unique risks such as interest payments for use of the borrowed money.2. For example, if you hold futures contracts in a margin account, you have to maintain a certain amount of margin depending on how the market value of the contracts change. 3. Gross profit margin (which is the difference between revenue and expenses) is one measure of a company's performance. 4. The formula for calculating the interest rate on an adjustable-rate mortgage is the adjustment-index rate (e.g. Treasury Index) plus the percentage of the margin. For example, if the Treasury Index is 6% and the interest rate on the mortgage is 8%, the margin is 2%. |
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What is a margin account?
A margin account is an account offered by brokerages that allows investors to borrow money to buy securities. An investor might put down 50% of the value of a purchase and borrow the rest from ... -
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One way that investors borrow funds from brokerages is through margin accounts; it is these interest charges that allow them to charge such low commission rates. How do we calculate the interest ... -
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Your broker's actions are not legal unless he or she sold the securities under certain conditions. Let's look at the two common instances in which your broker's actions are legal:First, if you ... -
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