Margin Overview

Margin trading lets you borrow money from your broker to trade, using your existing investments as collateral. This can increase your buying power, but it also increases risk — losses can be larger than with cash-only trading. 

 

Regulation T (Reg T) sets the basic rules for margin in the U.S. It generally allows you to borrow up to 50% of the purchase price of eligible securities when you open a position. You must also maintain a minimum level of equity in your account, or you may be required to add funds or reduce positions.

 

What is initial margin? 

 

Initial margin is the amount of money you must deposit upfront to open a leveraged position. It acts as a good-faith deposit to cover potential losses. 

 

For stocks, initial margin is set by Regulation T, which typically requires 50% of the trade value when you open a position. 

 

For futures, initial margin is set by the exchange (not Reg T) and is usually much lower than the full contract value, reflecting the contract’s risk. Futures margins are not a down payment — they are performance bonds that are adjusted daily based on market moves. 

 

What is maintenance margin? 

 

Maintenance margin is the minimum amount of equity you must keep in your account to keep a leveraged position open. 

 

For stocks, this is typically 25% of the position’s value (or higher if required by the broker). If your equity falls below this level, you may receive a margin call and be required to add funds or reduce positions. 

 

For futures, maintenance margin is set by the exchange and is usually lower than the initial margin. If your account balance falls below the maintenance level, you must restore it to the initial margin amount, often quickly or intraday, due to daily mark-to-market. 

 

What is overnight margin? 

 

Margin required to hold positions beyond the trading session.