Minimum Margin

AAA

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.

INVESTOPEDIA EXPLAINS '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. Leverage

    1. The use of various financial instruments or borrowed capital, ...
  2. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin ...
  3. Margin Call

    A broker's demand on an investor using margin to deposit additional ...
  4. Margin Account

    A brokerage account in which the broker lends the customer cash ...
  5. Regulation T - Reg T

    The Federal Reserve Board regulation that governs customer cash ...
  6. Broker's Call

    The interest rate charged by banks on loans made to broker-dealers, ...
Related Articles
  1. Introduction To Single Stock Futures
    Options & Futures

    Introduction To Single Stock Futures

  2. Finding Your Margin Investment Sweet ...
    Investing Basics

    Finding Your Margin Investment Sweet ...

  3. Money Management Matters In Futures ...
    Options & Futures

    Money Management Matters In Futures ...

  4. Successful Ways That Governments Reduce ...
    Economics

    Successful Ways That Governments Reduce ...

comments powered by Disqus
Hot Definitions
  1. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  2. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  3. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  4. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  5. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
  6. Limit-On-Open Order - LOO

    A type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of ...
Trading Center