Margin account

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Related to Margin account: margin call, short selling

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 ?
In periods of rising stock markets, investors borrow more margin loans and buy more stocks in their margin accounts, inducing higher stock prices and subsequently qualifying the borrowers for additional margin loans.
In our July 23rd letter, we alerted you to the fact that Ahmed Hussein, a dissident member of the Quality Systems Board, and a shareholder in the company who has proposed a slate of director nominees to take over seven of the nine seats on our Board, pledged all of his shares of QSI as collateral in margin accounts in flagrant violation of QSI's insider trading policy.
You must have a margin account to sell short and you'll pay interest on the amounts you borrow," says Antoine Sylvas, an investment specialist with Charles Schwab in San Francisco.
Portfolio Margin Accounts Free Up Capital for Opportunities As They Happen
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.
But if the price falls to $70 a share in the margin account - $7,000 in your total portfolio - then you get a margin call.
Although the Company did not explicitly disclose the reason for Pedersen's resignation, the 8-K included a general discussion of the Company's policy prohibiting holders of at least 10% of ZAGG stock from engaging in speculative transactions involving ZAGG stock, such as holding those securities in a margin account.
Employees who want to short $5,000 of stock, for example, would need to set up a margin account and hand their broker a check for $2,500.
If you qualify for a margin account, you can take out a loan at a competitive interest rate and choose your own repayment schedule.
They can borrow another $100,000 in a margin account, and they can short the stocks (remember stock jockey Davis?
FINRA determined that Scottrade allowed certain margin account customers who executed a high volume of trades to continue to trade after the value of their accounts fell below the minimum equity requirement.
It combines checking, a money-market account, brokerage margin account, and usually a bank credit card.