Initial margin

 

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Initial margin

The payment which investors have to pay to a broker to trade on margin, commonly used in trading futures and contracts for difference. Initial margin is usually set at a percentage of the value of the contracts being traded. For example, a trader who buys long CFDs with a contract value of 12,000 might be required to deposit 2,400 (20%) with the broker as initial margin.The attraction of margin trading for traders is that they are effectively using the broker's money to speculate, and if successful can get a higher return on investment than by only using their own money. Put another way, their 2,400 of cash buys them exposure to 12,000 of shares, whereas if they were trading the shares themselves it would give them exposure only to 2,400 of shares.The flip side is that margin trading magnifies losses as well as profits, so if the trader is unsuccessful it can be very risky.

Initial margin

(1) Amount of money deposited by both buyers and sellers of futures contracts to ensure performance of the terms of the contract; (2) amount of cash or eligible securities required to be deposited with a broker before engaging in margin transactions.



Initial margin

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Initial public offering

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Security deposit (initial)

Security deposit (initial)

Synonymous with the term margin. A cash amount that must be deposited with the broker for each contract as a guarantee of fulfillment of the futures contract. It is not considered as part payment or purchase. Related: Margin.


Initial charge

Initial charge

A charge imposed by a fund management company to cover administrative and marketing costs, and to pay for any commission that had to be paid to an intermediary like an IFA (also known as front end load).


Initial filing

Initial filing

Has various meanings. It could refer to a form that is filed with the Securities and Exchange Commission in advance of a major event, such as a public offering or a share repurchase. It could also refer to filings that occur before legal inside transactions.


Initial margin requirement

Initial margin requirement

When buying securities on margin, the proportion of the total market value of the securities that the investor must pay for in cash. The Security Exchange Act of 1934 gives the Board of Governors of the Federal Reserve the responsibility to set initial margin requirements, but individual brokerage firms are free to set higher requirements. In futures contracts, initial margin requirements are set by the exchange.




 
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