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Margin (finance) In finance, margin is the collateral that a holder of a financial instrument has to deposit with a counterparty (most often their broker or an exchange) to cover some or all of the credit risk the holder poses for the counterparty. This risk can arise if the holder has done any of the following:
A company's earnings before interest, taxes, depreciation, and amortization (commonly abbreviated EBITDA, pronounced / iː b ɪ t ˈ d ɑː /, / ə ˈ b ɪ t d ɑː /, or / ˈ ɛ b ɪ t d ɑː /) is a measure of a company's profitability of the operating business only, thus before any effects of indebtedness, state-mandated payments, and costs required to maintain its asset base.
In contrast, if the market price of his contract has decreased, the exchange charges his account that holds the deposited margin. If the balance of this account becomes less than the deposit required to maintain the account, the trader must immediately pay additional margin into the account in order to maintain the account (a "margin call").
How margin trading works. Buying on margin involves getting a loan from your brokerage and using the money from the loan to invest in more securities than you can buy with your available cash ...
Your maintenance margin is 30 percent. Minimum account value to avoid margin call = Margin loan / ( 1 – maintenance margin ) In this example, if the market value of the account falls below ...
Special memorandum account ( SMA) [1] is a margin credit account used for calculating US Regulation T requirements on brokerage accounts. In addition to Initial Margin and Maintenance Margin requirements, the SMA ledger is used to lock in unrealized gains that augment the client's buying power. According to Regulation T, Section 220.5: [2]
Definition. A pattern day trader is generally defined in FINRA Rule 4210 ( Margin Requirements) as any customer who executes four or more round-trip day trades within any five successive business days. [3] FINRA Rule 4210 is substantially similar to New York Stock Exchange Rule 431. [4] If, however, the number of day trades is less than or ...
Collateral management. Collateral has been used for hundreds of years to provide security against the possibility of payment default by the opposing party in a trade. Collateral management began in the 1980s, with Bankers Trust and Salomon Brothers taking collateral against credit exposure. There were no legal standards, and most calculations ...