margin requirement
A "margin requirement" is the minimum amount of money that an investor must deposit with a broker to open and maintain a leveraged trading position. This requirement is expressed as a percentage of the total trade value and serves as a security for the broker against potential losses. For example, if the margin requirement is 20%, an investor must deposit $2,000 to control a $10,000 position.
Margin requirements can vary based on the type of asset being traded, the broker's policies, and market conditions. They are crucial for managing risk in trading, as they help ensure that investors have enough capital to cover potential losses. Understanding margin requirements is essential for anyone involved in trading, including those dealing with stocks, options, or futures.