Maintenance Margin

The minimum amount needed to maintain a holding in a margin account.

Suppose investor A has $10,000 in his margin account. He can buy $20,000 worth of stock, because the initial margin requirements are 50% (which means he can effectively buy or short twice the amount of stock he could with his cash alone). Suppose investor A buys $20,000 of stock A on margin. According to Regulation T, he would need to have at least $5000 in his account to maintain his long position. However, many brokerage firms have maintenance margin requirements at 30-40% to cushion themselves against a potential sharp drop in the stock price. A fall below the level of maintenance margin required would result in a margin call from the broker if adequate funds are not deposited.

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