What is a margin account?

The term margin account refers to a brokerage account in which a trader's broker-dealer lends them cash to purchase stocks or other financial products. The margin account and the securities held within it are used as collateral for the loan. It comes with a periodic interest rate that the investor must pay to keep it active.

What is a margin call on a brokerage account?

Margin call: When the value of your brokerage account falls below the margin requirement, a margin call requires the you to deposit more money into the account or sell off assets to maintain the account value. Broker call rate: The rate that investment firms pay to borrow the money used to fund margin loans. What are margin accounts?

When did margin account lending start?

The concept of margin account lending started in the late 1800s as a way of financing railroads. By 1920, brokers required investors to deposit a small sum of money into their account to access credit facilities. The situation’s changed over the years, with brokerages requiring investors a credit limit of up to 50% of the investor’s equity.

What is a long position & a margin account?

Investors can establish long positions in securities such as stocks, mutual funds, currencies, or even in derivatives such as options and futures. Holding a long position is usually considered bullish. A cash account and a margin account are two ways for investors to purchase securities. The difference is in the monetary requirements of each.