Margin Buying Basics | by Wall Street Survivor

What is buying on margin?

Opening a margin account allows you to trade on borrowed money. You have to open up a margin account when shorting stocks because you’re borrowing the stock rather than purchasing it. In order to maintain a margin account, you must have collateral to assure the broker that he’ll get his money back. Collateral is something (in this case money) that the borrower gives the lender as protection in case he fails to pay back what he owes.

Initial margin: You must keep a minimum amount of your own money in the margin account when you sell the borrowed stock. The usual requirement is 150% of the value of the short sale.

Maintenance margin: This is where the risk comes in. You must also maintain a minimum amount of money in the account depending on the current value of the stock you shorted

As the price goes up, the maintenance margin requirement goes up, and you’ll need to add more and more money to your account. This is known as a margin call.

[FoodLiquorCool]

I just watched four videos trying to describe this. This is the only one that made sense to me

[LMSalinas]

Using this video to teach my 11th grade students about the causes of the great depression!

[ibn]

Wouldn't Frank have to pay more because of interest accumulated every day from borrowing the money from the broker? Please explain that part to me because I want to understand if you left out the extra payment he would have to pay or this video was just an ideal situation

[AQUATICrasberry]

I am currently taking a finance class and I have a midterm coming up. These videos have simplified everything so well, I am no longer worried about the test. Thanks for the great videos!

[sims.]

This helped me a lot to understand robin-hood gold.

[sycamorr]

well you completely left out that part of you needing to pay off the interest of the loan, and that would make your gain from this whole thing even less

[lawcasestory]

Thanks. your explanation made it very clear for me to understand this😊

[DARTHDANSAN]

Thanks I finally have a decent understanding of.. now what’s a profit margin?

[TheDreadPirateDickstein]

Typical interest rates on margin loans?

Subject to FED interest rates? Credit score? LIBOR? etc.?

What sets the loan interest rate?

[prachisaxena]

what will be happen if the price of the share decrease..?

[jpepper]

Can you usually sell at any time or only when it expires?

[avannieiee]

this videos are all fit to grade 11 student..and its me ..thank you

[jc_real]

just to add on, the actual return is lower after accounting for tax and cost of margin trading

[mountain]

what's in it for the broker if s/he makes $150 regardless of the price of the stock going up ?!

[emmasmith]

I am a student at a middle school in Cincinnati, Ohio. I would like to use your video for a project I am working on for my class. The project will require me to download and possibly edit out portions of your video. This project will be on a password restricted site so my work will only be published for my fellow classmates to see. Please respond to my reply to accept or deny my request.

[stuartchangoor]

But doesn't the margin requirement at the price of 600 go up since its now 30% of 600 instead of 500?

[MD-trsh]

Wow, this 2 min video answered a question I've had for 2 days. Awesome!

[siddhantpatil]

This helped me for Margin call movie...

[shellnexus]

What do you call Frank in economic terms?

[ayedrey]

what stock goes up by a hundred dollars lol?