What is buying on margin?
Learn more at: https://www.wallstreetsurvivor.com
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.
Learn more about trading on margin with Wall Street Survivor's course Understanding Advanced Techniques: http://courses.wallstreetsurvivor.com/is/16-understanding-advanced-techniques/
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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
+Julian Overton yes you are very right just some people come to market thinking we make milions we make some but in long run compound intrest and stock prices increse make us money if we sell at time and not try to be greedy otherwise we loose. :)
vaidas bronusas If “newbies” didn’t invest at all then we wouldn’t have a stock market. People have to start at some time in their life lol. Well they don’t have to, but they should. That’s like saying “newbies” shouldn’t drive cars because they’re dangerous; in a sense. Lol
+mdogzino No to mention intrest is bad new people gone think its free :) But newbies shouldn,t invest at all. They come to loose money and it makes sense it helps clever investors get richer :) Margin is good but risky thing currently i got 10 000 pounds margin .
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.
The stock market crash did not cause the great depression. The federal reserve caused the great depression. "You're right, we did it"- Ben Bernake admitting fault for the Great Depression of the fed's behalf
+Linda Marie Salinas Hey Linda! Great stuff. We really love getting involved in classrooms. If you wanted to chat more about how we can help out your students you can shoot me an email [email protected] :)
Count MaxwellVonDickstein Every broker/creditor is different. Some use a base + premium with the base being derived from an index like LIBOR.
However, margin interest rates are usually never contingent upon the borrower's credit score or profile.
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