Margin Limit

DEFINITION Margin is the minimum amount of collateral -- in either cash or securities -- you must have in your margin account to buy on margin, sell short, or invest in certain derivatives. The initial margin requirement is set by federal law and varies from product to product. For example, to buy stock on margin, you must have at least 50% of the purchase price in your account.
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A 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 (most often their broker or an exchange). The collateral can be in the form of cash or securities, and it is deposited in a margin account. On United States futures exchanges, "margin" was formerly called performance bond. Most of the exchanges today use SPAN (Standard Portfolio Analysis of Risk) methodology for calculation of margin in 'Options' and 'Futures'. SPAN was developed by the Chicago Mercantile Exchange in 1988.

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