Margin (finance)

Margin is a term used in the financial world to indicate a mandatory insurance placed by the holder of a position (sell or buy) the security trade, options or futures contracts to protect the credit risk of the partner counterweight (counterparty). Increased risk will occur if the holder to one of the following actions:

* To borrow cash from partners counterweight to buy a security or option
* Conducting security sales or option by how short selling
* To be parties to a futures contract

This guarantee can be in the form of cash or securities placed in a special account called a "margin account". In the U.S. futures exchanges term used officially for this margin is guaranteed performance.

Margin purchases is the purchase of a security by way of some purchases using their own funds and partly using funds borrowed from a stockbroker. This can increase the impact and increase the profit losses. Security is used as a guarantee of the loan. The net value is the difference between security and the value of the loan value is the value of own capital is used in the original purchase. The difference is what should always be kept above the "value of the minimum margin requirement" determined to protect the broker from the fall of security prices to be below the value of the guaranteed debt.

In the era of the 1920s, very free margin requirements where only a very small percentage of the funds themselves are used by investors in buying shares. When shocks on the capital market where the net value of the security falls rapidly below the minimum margin requirements, is forcing investors to sell the position. This is what became one of the factors that play a role in the American stock market crash in 1929 which eventually resulted in the Great Depression.

Margin payment now

Margin payment or current now liquidating margin is the value of the security position if the current will be cashed. In other words, if the holder has a position of "short", this value is the value of the money required to make purchases again, when he was on posis "long" then this value is the value that you obtained by selling the position