Deposit Formula Bulletin For Free

Understanding Maintenance Margin Although FINRA requires a 25% minimum maintenance margin, many brokerage firms may require that as much as 30% to 40% of the securities' total value should be available.

An investor can borrow against cash in the account or against marginable stocks or debt securities, such as bonds, in the account. Buying on margin provides investors the ability to leverage their investments for building larger investment portfolios than they otherwise could maintain using only their available cash.

To purchase a security on margin, FINRA (a government-authorized regulator of brokerage firms) requires that you have at least $2,000 or 100% of the security's purchase price (whichever value is less) deposited into your account.

Non-marginable securities include recent IPOs, penny stocks, and over-the-counter bulletin board stocks. The downside of marginable securities is that they can lead to margin calls, which in turn cause the liquidation of securities and financial loss.

The above table shows how far your portfolio needs to decline to get a margin call depending on how leveraged you are. A modest 10% to 20% leverage rate is not dangerous for most people, even factoring in that maintenance requirement can rise during times of peak volatility.

At a minimum, most brokerages require investors to have $2,000 of cash or securities in an account to open a margin account. Brokerages may request higher amounts, as well. Initially, you must have equity of 50% to trade on margin.

Before trading on margin, FINRA, for example, requires you to deposit with your brokerage firm a minimum of $2,000 or 100 percent of the purchase price of the margin securities, whichever is less. This is known as the ?minimum margin.? Some firms may require you to deposit more than $2,000.