Minimum Margin

DEFINITION of 'Minimum Margin'

The initial amount required to be deposited in a margin account before trading on margin or selling short. For example, the NYSE and the NASD require investors to deposit a minimum of $2,000 in cash or securities to open a margin account. Keep in mind that this amount is only a minimum - some brokerages may require you to deposit more than $2,000.

BREAKING DOWN 'Minimum Margin'

When you buy on margin, there are key levels - as governed by the Federal Reserve Board's Regulation T - that must be maintained throughout the life of a trade. The minimum margin, which states that a broker can't extend any credit to accounts with less than $2,000 in cash (or securities) is the first requirement. Second, an initial margin of 50% is required for a trade to be entered. Third, the maintenance margin says that you must maintain equity of at least 25% or be hit with a margin call.

RELATED TERMS
  1. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin ...
  2. Excess Margin Deposit

    Funds deposited in a trading account beyond what is required ...
  3. Buying On Margin

    The purchase of an asset by paying the margin and borrowing the ...
  4. Option Margin

    The cash or securities an investor must deposit in his account ...
  5. Margin Call

    A broker's demand on an investor using margin to deposit additional ...
  6. Initial Margin

    The percentage of the purchase price of securities (that can ...
Related Articles
  1. Markets

    Intermediate Guide To E-Mini Futures Contracts - Margin

    Margin is essentially a loan that a brokerage firm extends to a client (the trader or investor) that is used for the purchase of trading instruments. Margin trading allows traders and investors ...
  2. Options & Futures

    Margin Trading: What Is Buying On Margin?

    The Basics Buying on margin is borrowing money from a broker to purchase stock. You can think of it as a loan from your brokerage. Margin trading allows you to buy more stock than you'd be able ...
  3. Options & Futures

    Margin Trading: Conclusion

    Here's the bottom line on margin trading: You are more likely to lose lots of money (or make lots of money) when you invest on margin. Now let's recap other key points in this tutorial: ...
  4. Investing

    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 ...
  5. Professionals

    Buying on Margin and Maintenance Margin

    CFA Level 1 - Buying on Margin and Maintenance Margin. Learn the process of buying stock on margin. Discusses the role of a brokerage firm and the possibility of a margin call.
  6. Options & Futures

    Margin Trading: The Dreaded Margin Call

    In the previous section, we discussed the two restrictions imposed on the amount you can borrow. First, the initial margin, which is the initial amount you can borrow. Second, the maintenance ...
  7. Professionals

    Margin Accounts

    Margin Accounts
  8. Term

    Understanding the Maintenance Margin

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

    Cash and Margin Accounts

    FINRA/NASAA Series 66 Section 2 - Cash and Margin Accounts. This section discusses cash account, margin accounts and regulation T in detail.
  10. Professionals

    Margin Requirements

    Margin Requirements
RELATED FAQS
  1. What happens if I cannot pay a margin call?

    Minimum margin is the amount of funds that must be deposited with a broker by a margin account customer. With a margin account, ... 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. What is the difference between initial margin and maintenance margin?

    Learn the difference between an initial margin requirement and a maintenance margin requirement and how these affect an investor's ... Read Answer >>
  4. How is buying on margin regulated by the Securities and Exchange Commission (SEC)?

    Learn how FINRA and the Federal Reserve regulate margin account trading, and understand how pattern day trading can impact ... Read Answer >>
  5. What are the different types of margin calls?

    Learn the differences between margin calls and fed margin calls while reviewing the definitions of each and how to satisfy ... Read Answer >>
  6. 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 >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center