margin account


A brokerage account in which the brokerage lends the customer cash with which to purchase securities. Unlike a cash account, a margin account allows an investor to buy securities with money that he/she does not have, by borrowing the money from the broker. The Federal Reserve limits margin borrowing to at most 50% of the amount invested. Some brokerages have even stricter requirements, especially for volatile stocks. People usually open margin accounts to take advantage of an opportunity to leverage their investment, rather than because they don't have the money to make the full purchase.
Brokerages charge a relatively low interest rate on margin loans in order to entice investors into buying on margin.

Use margin account in a sentence

You may want to keep a margin account even if you do not invest just in case you see a great spot.

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The margin account was set up and I hoped everything went okay with it, because the person using it was new.

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The margin account operated on credit gained from the customers' promises to settle their bills eventually, sometime in the future.

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