Margin
1. Borrowed money that is used to purchase securities. This practice is referred to as "buying on margin".
2. The amount of equity contributed by a customer as a percentage of the current market value of the securities held in a margin account.
3. In a general business context, the difference between a product's (or service's) selling price and the cost of production.
4. The portion of the interest rate on an adjustable-rate mortgage that is over and above the adjustment-index rate. This portion is retained as profit by the lender. Investopedia Says:
1. Buying with borrowed money can be extremely risky because both gains and losses are amplified. That is, while the potential for greater profit exists, this comes at a hefty price - the potential for greater losses. Margin also subjects the investor to a number of unique risks such as interest payments for use of the borrowed money.
2. For example, if you hold futures contracts in a margin account, you have to maintain a certain amount of margin depending on how the market value of the contracts change.
3. Gross profit margin (which is the difference between revenue and expenses) is one measure of a company's performance.
4. The formula for calculating the interest rate on an adjustable-rate mortgage is the adjustment-index rate (e.g. Treasury Index) plus the percentage of the margin. For example, if the Treasury Index is 6% and the interest rate on the mortgage is 8%, the margin is 2%. Related Terms:
Adjustable-Rate Mortgage - ARM
Broker's Call
Buying Power
Call Loan
Initial Margin
Maintenance Margin
Margin Account
Margin Call
Minimum Margin
Non-Marginable Securities
SPAN Margin
Treasury Index |