ON MARGIN Meaning and
Definition
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On Margin is a financial term that refers to the practice of buying an asset by borrowing funds from a broker or a lending institution. When an individual or investor purchases securities, such as stocks or bonds, on margin, they are only required to pay a percentage of the total cost of the securities, while borrowing the rest from their broker. This borrowed money is known as the margin loan.
The margin loan enables investors to increase their purchasing power and potentially amplify their returns. However, it also exposes them to a higher level of risk, as they are now using leverage to finance their investment. This means that if the value of the securities decreases, the investor could face substantial losses as they are still responsible for repaying the margin loan.
The amount of money an investor is required to put down as a percentage of the total cost of the assets is known as the initial margin requirement. Additionally, there may be maintenance margin requirements, which represent the minimum amount of equity that must be maintained in the account. If the value of the assets falls below the maintenance margin, the investor may receive a margin call from their broker, requiring them to add more funds to restore the required equity level.
Overall, buying on margin is a strategy that allows investors to potentially increase their investment returns, but it also carries significant risks due to the use of borrowed funds.
Common Misspellings for ON MARGIN
- in margin
- kn margin
- ln margin
- pn margin
- 0n margin
- 9n margin
- ob margin
- om margin
- oj margin
- oh margin
- on nargin
- on kargin
- on jargin
- on mzrgin
- on msrgin
- on mwrgin
- on mqrgin
- on maegin
- on madgin
- on mafgin
Etymology of ON MARGIN
The etymology of the phrase "on margin" can be traced back to the word "margin".
The word "margin" originated from the Latin word "margo", meaning "edge" or "boundary". It entered the English language in the 14th century, primarily referring to the blank space at the edges of a book or written document.
The phrase "on margin" specifically refers to the practice of purchasing stocks or other investments using borrowed money, thereby allowing individuals to trade with more capital than they possess. This practice dates back to the early 20th century when brokers began offering customers the option to leverage their investments by borrowing from them. The phrase "on margin" signifies trading stocks by putting only a percentage of the total value down as a deposit, while the rest is borrowed from the broker.
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