MAINTENANCE MARGIN
Back to GlossaryDefinition
The minimum equity that must be maintained in a margin account to keep positions open.
Summary
Maintenance margin is a safety buffer required by brokers to ensure investors can cover potential losses in their margin accounts. Think of it as a minimum balance requirement - if your account equity falls below this threshold (typically 25-50% of the total position value), you'll receive a margin call requiring you to either deposit more funds or sell securities to restore the required equity level. This protects both the investor and broker from excessive losses.
Usage Context
Critical when studying margin trading, risk management, broker regulations, and portfolio leverage strategies. Essential for understanding how margin accounts work and the risks involved in leveraged investing.
Common Confusions
- Confusing maintenance margin with initial margin - maintenance is ongoing, initial is upfront
- Thinking maintenance margin is a fixed dollar amount rather than a percentage of position value
- Believing that meeting maintenance margin eliminates all risk of further margin calls
- Assuming maintenance margin requirements are the same across all brokers and securities
