Maintenance margin

Author Topic: Maintenance margin  (Read 274 times)

Offline munna99185

  • Faculty
  • Hero Member
  • *
  • Posts: 573
  • Test
    • View Profile
Maintenance margin
« on: March 12, 2014, 03:22:13 PM »
Maintenance margin is the minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account. Keep in mind that this level is a minimum, and many brokerages have higher maintenance requirements of 30-40%.

When a trader buys on margin, key levels must be maintained throughout the life of the trade. First off, a broker cannot extend any credit to accounts with less than $2,000 in cash (or securities). Second, the initial margin of 50% is required for a trade to be entered. Finally, the maintenance margin says that an equity level of at least 25% must be maintained. The investor will be hit with a margin call if the value of securities falls below the maintenance margin.
[Source: http://www.investopedia.com/terms/m/maintenancemargin.asp]

Sayed Farrukh Ahmed
Assistant Professor
Faculty of Business & Economics
Daffodil International University