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How margin trading works Buying on margin involves getting a loan from your brokerage and using the money from the loan to invest in more securities than you can buy with your available cash.
Portfolio margin usually results in significantly lower margin requirements on hedged positions than under traditional rules. While the margin requirements of Regulation T generally limit leverage on equity to 2, with portfolio margin, leverage of 6.67 or more is possible.
The minimum margin requirement, sometimes called the maintenance margin requirement, is the ratio of (stock equity − leveraged dollars) to stock equity, where "stock equity" is the stock price multiplied by the number of shares bought and "leveraged dollars" is the amount borrowed in the margin account.
There is an implicit assumption in that account, however, which is that the underlying leveraged asset is the same as the unleveraged one. If a company borrows money to modernize, add to its product line or expand internationally, the extra trading profit from the additional diversification might more than offset the additional risk from ...
If you want access to the best stocks in the market, then having a brokerage account is an absolute must. But compared to opening a bank account, the process for setting up a brokerage account can ...
Margin trading is the practice of buying securities with borrowed money. Like most brokers, Vanguard offers this feature to qualifying clients. No matter what broker you use, margin trading can be ...