The demand for robust returns in the capital markets environment has created an environment where investors require capital to enhance their returns. This demand has generated a sophisticated process in which investors can borrow capital that is used to invest in stocks and futures to enhance their returns. Most brokers offer trading margin as a product which allows investors to borrow capital using the securities they hold within their account as collateral. Margin provides leverage, which can enhance and detracted from returns.
Trading Margin Defined
Trading Margin is collateral that the holder of a financial instrument has to deposit to cover some or all of the credit risk of their counterparty. Margin is most often associated with a broker or an exchange. The collateral that can be used to post margin can be in the form of cash or securities, and it is deposited in a margin account.
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