Margin
Definition
Borrowed money from a broker used to purchase securities, or the difference between the selling price and cost of a product.
Formula
Margin Requirement = Purchase Price × Margin PercentageIn investing, margin refers to borrowing money from a brokerage to buy stocks or other securities. A margin account allows you to leverage your existing holdings to purchase more securities, potentially amplifying returns but also magnifying losses.
The Federal Reserve's Regulation T requires an initial margin of at least 50%, meaning you must deposit at least half the purchase price. A maintenance margin of 25% to 30% must be maintained. If your account value drops below this level, you receive a margin call requiring additional deposits.
In business, margin refers to the difference between revenue and costs. Gross margin measures production efficiency, while net margin reflects overall profitability. Companies with high margins have more pricing power and financial flexibility.
Related Calculators
Related Terms
Leverage
financeThe use of borrowed money to amplify potential returns on an investment, which also increases the potential for losses.
Securities
financeTradable financial instruments including stocks, bonds, and options that represent ownership, debt, or the right to buy or sell an underlying asset.
Profit Margin
financeThe percentage of revenue that remains as profit after all expenses are deducted, measuring a company's efficiency and pricing power.
Volatility
financeA statistical measure of the dispersion of returns for a given security or market index, representing the degree of price fluctuation over time.
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