Margin Calculator

What is margin?

In finance, the margin is the collateral that an investor has to place with their broker or exchange to offset the credit risk the holder creates for the broker or the exchange. For example, an investor might generate credit risk if they borrow funds from the broker to buy financial instruments, borrow financial instruments to sell them short, or participate in a derivative transaction.

Margin rate

The margin rate is the interest imposed by brokers when traders acquire financial assets like a stock on margin and keep it overnight. It may also refer to a cost levied above and beyond the broker’s call rate. In trading, it is typical for a trader to acquire shares of stock on margin, which implies they are borrowing money from the broker to purchase more shares than they usually would have been able to.

Margin requirements

A margin requirement is the proportion of marginable securities that an investor must pay for with his/her funds. It may be further split down into Initial Margin Requirement and Maintenance Margin Requirement. According to Regulation T of the Federal Reserve Board, the Initial Margin requirement for stocks is 50%, and the Maintenance Margin Requirement is 30%. Still, greater requirements for both can apply for particular assets.

An Initial Margin Requirement refers to the proportion of equity required when an investor establishes a trade. For example, if you have $5,000 and would like to acquire stock ABC which has a 50% initial margin need.