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What does it mean when someone says a trade requires 10%, 100% or 150% margin?

What kind of calculations are required when you talk about margin and collateral?

What is a margin call and when does it happen?

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The word margin has several uses:

  • Buying on margin refers to money borrowed.

  • Initial margin requirement refers to the amount of collateral required to buy on margin (cash and/or marginable securities). It's 50% unless you're trading leveraged securities or your broker imposes stricter margin requirements.

  • Margin maintenance requirement (MMR) refers to the amount of collateral you must have to maintain a margin position (25% for long positions and 30% for short positions unless you're trading leveraged securities or your broker imposes stricter margin requirements). A margin call occurs if your account equity drops below your MMR.

Here's an article which explains long and short margin calculations.

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