Initial margin

Initial margin,

Definition of Initial margin:

  1. To open a margin account at a brokerage firm, an account holder first needs to post a certain amount of cash, securities or other collateral, known as the initial margin requirement. A margin account encourages investors, traders, and other market participants to use leverage to purchase securities with a total value that's greater than the available cash balance in the account. A margin account is essentially a line of credit in which interest is charged on the outstanding margin balance.

  2. The minimum account balance required before an investor will be approved to buy or sell a futures contract. Compare to Maintenance Margin. See Margin.

  3. Initial margin is the percentage of the purchase price of a security that must be covered by cash or collateral when using a margin account. The current initial margin requirement set by the Federal Reserve Board’s Regulation T is 50%. However, this regulation is only a minimum requirement, where equity brokerage firms may set their initial margin requirement higher than 50%. .

How to use Initial margin in a sentence?

  1. Initial margin is the percent of a purchase price that must be paid with cash when using a margin account. .
  2. Fed regulations currently require that initial margin is set at a minimum of 50% of a security's purchase price. But exchanges can set initial margin requirements higher than the Fed minimum.
  3. Initial margin requirements are different from maintenance margin requirements, which is the percent of equity that must be maintained going forward.

Meaning of Initial margin & Initial margin Definition