Margin account

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Related to Margin Accounts: Margin trading, Buying on Margin

Margin account (stocks)

A leverageable account in which stocks can be purchased for a combination of cash and a loan. The loan in the margin account is collateralized by the stock; if the value of the stock drops sufficiently, the owner will be asked to either put in more cash, or sell a portion of the stock. Margin rules are federally regulated, but margin requirements and interest may vary among broker/dealers.

Margin Account

A brokerage account in which the brokerage lends money to the account holder, which the account holder then uses to buy securities. That is, a margin account is one in which an investor makes investments with borrowed money. This opens up investment opportunities that an investor might not otherwise be able to afford. More importantly, however, a margin account increases both gains and losses for the investor. Regulation T and other regulations require margin accounts to have money or securities kept as collateral. See also: Margin call, Maintenance.

margin account

A brokerage account that permits an investor to purchase securities on credit and to borrow on securities already in the account. Buying securities on credit and borrowing on securities are subject to standards established by the Federal Reserve and/or by the firm carrying the account. Interest is charged on any borrowed funds and only for the period of time that the loan is outstanding. Also called general account. Compare cash account. See also initial margin requirement, maintenance margin requirement.
Are there any advantages to opening a margin account as opposed to a cash account?

A margin account provides the flexibility to borrow funds using your securities as collateral. This can be an advantage if used properly. Funds from a margin loan can be used to purchase other securities, or they can be utilized for consumption. The risk is that a decrease in the market value of the account can create a "margin call," which requires the deposit of additional securities, the deposit of cash, or the liquidation of some securities held in the account.

George Riles, First Vice President and Resident Manager, Merrill Lynch, Albany, GA

Margin account.

Margin accounts are brokerage accounts that allow you a much wider range of transactions than cash accounts.

In a cash account you must pay for every purchase in full at the time of the transaction. In a margin account, you can buy on margin, sell short, and purchase certain types of derivative products.

Before you can open a margin account, however, you must satisfy the firm's requirements for margin transactions. You must also agree in writing to the terms of the account, and make a minimum deposit of at least $2,000 in cash or qualifying securities.

If you buy on margin or sell short, you pay interest on the cash or the value of the securities you borrow through your margin account and must eventually repay the loan.

Because both types of transactions use leverage, they offer the possibility of making a substantially larger profit than you could realize by using only your own money.

But because you must repay the loan plus interest even if you lose money on the investment, using a margin account also exposes you to more risk than a cash account.

References in periodicals archive ?
But the representative allowed Quiros and the limited partnerships under his financial control to set up margin accounts collateralized by short-term Treasury bills purchased by the limited partnerships, with funds derived from the EB-5 program.
12,792 Notes: This table presents descriptive statistics for house (H) and customer (C) margin accounts for 71 CME clearing members.
This may indicate that margin debt borrowers borrow more and buy more stocks in their margin accounts when the economy grows.
During the event, the participants were taken through an overall introduction into the securities industry, and discussed the servicing and maintaining of customer accounts, equities, the fundamentals of debt, exchange markets, the over-the-counter market, margin accounts, basic option positions and economics and securities analysis.
Answer--A margin account enables an investor to use unencumbered securities to borrow cash that in turn is used to purchase additional securities.
Stocks trading below $5 can't be traded in margin accounts, and conventional market wisdom holds that stocks priced above $25 tend to discourage individual investors.
It provides information on broker types, the steps involved in researching and reporting disputes, questions to ask, making the most of the client-broker relationship, and margin accounts.
Removal culture earth landscaping Unprocessed; Planting, tree protection, tree mounting, maintenance services; Drainage of squares and streets; Creating green and planting areas; Hard coverings for seats and routes including margin accounts.
The monthly report should include the quality, quantity and value of equities financed by margin trading and the finance percentage by the brokerage company, as well as the total liabilities of clients who have margin accounts.
It must be emphasized that one of the biggest planning mistakes is using money borrowed from security margin accounts for personal purposes.