Investor Glossary-margin agreementInvestor Glossary-margin agreementInvestor Glossary-margin agreementInvestor Glossary-margin agreementInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Margin Agreement

The HTML to link to this page
 

A margin agreement is a securities customer agreement signed by an investor who wants to borrow money against securities he or she already owns and purchase new securities with the loan. A margin agreement is almost always preceded by a cash account at the same broker. A margin agreement specified that the customer grants a lien on the account to the broker under certain regulated conditions. This part of the margin agreement is called the "hypothecation" agreement. Where the limits on the margin agreement investor's borrowing exceed certain levels, the broker automatically sells stock. This stock sale under a margin agreement when the customer does not cover the margin amount with cash is a "margin call" sale. For example, if you borrowed $7,000 to buy IBM on margin and your margin agreement was based on 100 shares of GOOG trading at $150, a margin agreement would force a margin call if GOOG stock went down to $80. Under your margin agreement your GOOG stock worth $8,000 x 50% would be worth only $4,000. A margin agreement would require you to sell at least $3,000 worth of IBM. A margin agreement loan is limited by the Federal Reserve regulations to no less than 50% of amounts already invested. Low interest rates for borrowing with margin agreement loan money are designed to encourage investors to buy securities on margin.



Rate this margin agreement definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: in escrow, wholly-owned subsidiary, risk management, phantom income, class C shares, deferred tax, minority interest, 1031 exchange, command economy, stock market close, VIX, 144a, average price per share, cancelled check, deferred revenue, 401a, 1035 exchange, EBITDA, required rate of return, debt service coverage, option premium, current ratio, margin rate, open position, limit order, reverse mortgage, FICO score, Zero Cost Collar, covered put, ex-dividend, FTSE, real GDP, liquidity ratio, LIBOR, labor relations, balance sheet, implied volatility, Key Rate Duration, irrevocable trust, diluted share, quality assurance, retained earnings, stock split, inflation, APR, ex-dividend date, dividends payable, annual return, per diem


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Investor Glossary | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use