GLOSSARY // Risk & Psychology
Margin
Margin is money borrowed from a broker to buy securities, with the account's holdings as collateral. Under Regulation T, the initial margin requirement is 50%: a trader must put up at least half the purchase price in cash or equity, so $10,000 of equity supports at most $20,000 of stock.
After the purchase, maintenance requirements take over — FINRA's floor is 25% equity, and most brokers set house requirements of 30% or higher. Margin loans accrue daily interest, commonly 8-12% annually at retail brokers, which is a real hurdle rate: a levered position has to beat the borrow cost before it makes anything.
A trader with $12,000 buys $24,000 of stock, borrowing $12,000 — exactly the Reg T maximum. At a 10% annual margin rate, the loan costs about $100 a month. If the position returns 8% in a year ($1,920) the interest bill (~$1,200) eats most of it; unlevered, the same $12,000 at 8% would have made $960 with no interest and no call risk.
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Educational only — not financial advice. Definitions simplified for clarity; markets are messier than definitions.