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

A margin account allows investors to borrow money to buy securities. Buying on margin gives investors financial leverage. It enables them to increase their potential gain, because they can buy more stock, but on the other hand, it also increases the risk of potential loss they can suffer.

Regulation T sets initial margin requirements at a minimum level of 50%, though some brokerages require more. If Bob the investor wanted to buy $20,000 worth of ABC Corporation stock, his initial margin would be $10,000, which would come from his own cash or marginable securities. He would borrow the other $10,000 from his brokerage to complete the transaction.

If Bob had less than $10,000 in his account, he could not complete the transaction.

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