margin

The use of borrowed money to purchase securities (buying “on margin”). The portion of the purchase price that you must deposit with your brokerage firm is called margin and is your initial equity or value in the account. The loan from the firm is secured by the securities you purchase. If the securities you’re using as collateral go down in price, your firm can issue a margin call, which is a demand that you repay all or part of the loan with cash, a deposit of securities from outside your account, or by selling some of the securities in your account. You pay interest on the amount you borrow until it is repaid. You must repay both the amount you borrowed and interest, even if you lose money on your investment.