margin account
Noun: 1. An account with a brokerage firm that allows an investor to buy securities using money borrowed from the broker. This type of account uses the purchased securities themselves as collateral for the loan. It enables investors to leverage their investments, potentially amplifying both gains and losses.
A margin account is used to describe the specific financial arrangement between an investor and a broker. It is a standard term in finance and investing. - You open a margin account with a broker to trade with borrowed funds. - The broker sets requirements, like an initial margin and a maintenance margin, for the margin account. - Trading in a margin account involves higher risk than trading in a cash account.
- "On margin": This phrase describes the act of buying securities using borrowed money from a broker, which is only possible with a margin account.
- He bought the stock on margin, hoping its price would rise quickly.
- Margin Call (noun): A demand by a broker for an investor to deposit additional money or securities to bring a margin account back to the required minimum value.
- Maintenance Margin (noun): The minimum equity an investor must maintain in a margin account.
- Initial Margin (noun): The percentage of the purchase price an investor must deposit with their own funds when buying a security on margin.
- Leveraged account: An account that uses borrowed funds to increase investment capacity. (Note: While very similar, "leveraged account" is a broader term that can include other forms of leverage beyond a standard margin account.)
- Cash Account: The opposite type of brokerage account where all transactions must be made with available cash; no borrowing is allowed.
- Brokerage Account: The general term for an account held with a broker; a margin account is a specific type of brokerage account.
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an account with a securities brokerage in which the broker extends credit
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