Featured:
Allergies
Grilling Guide
eHow Now Blog

Definition of Debt Margin

Definition of Debt Margin thumbnail
Margin debt has to be lower than the total account balance .

Margin debt refers to the value of stocks bought with borrowed money. Securities purchased with borrowed money are subject to an interest rate. The dollar value of the margin debt fluctuates daily based on changes in the stock market value of securities.

  1. Maximum Margin Debt

    • The maximum margin debt set up through a stock brokerage is usually 50 percent of the total value of the account. The margin debt has to stay lower than a predetermined value of the overall account balance in order to avoid a margin call. A margin call occurs when a broker requests that an investor increase the amount of investment or securities in an account in order to bring it up to the minimum margin required.

    Margin Debt Securities

    • Brokerage agency rules vary regarding the types of securities or stocks that investors can purchase using margin debt. In general, highly volatile securities, and those that have low valuations, usually do not qualify for purchase using margin debt.

    Margin Debt Levels

    • Fluctuations in margin debt levels can be an indicator of investor reaction to stock market conditions. Margin debt tends to increase when investors view stock market prospects positively; an increase in margin debt levels often occurs during periods of market highs and declines during market lows.

Related Searches:

References

Resources

  • Photo Credit stocks and shares image by Andrew Brown from Fotolia.com

Comments

You May Also Like

  • What Is Margin Debt?

    Margin debt is money a stock market investor borrows to invest in stock. Borrowing part of the purchase price, or buying on...

  • How to Compute the Legal Debt Margin

    A government entity can undertake a maximum amount of legal debt. This amount is defined by a legislative authority. The debt margin...

  • Margin of Safety on Stocks

    According to Investopedia, investing in stocks presents two primary risks: systematic risk and unsystematic risk. Systematic risk means the risk of the...

  • World Debt Facts

    When developed countries think of world debt they tend to think of the underdeveloped third world and the extreme poverty that exists...

  • How to Understand Legal Debt Limit

    The legal debt limit is a limit on the amount of money an organization or individual can borrow. It is set with...

  • Advantages & Disadvantages of Debt Trading

    Advantages & Disadvantages of Debt Trading. Tradable debt securities are bonds issued by the U.S. government, state and local governments and corporations....

  • The Definition of Stock Market Margin

    Buying stocks on margin involves borrowing money from your stockbroker to pay for a portion of the stock purchase. Margin stock buying...

  • What Are Margins in Finance?

    Margins are important in the financial arena and in business. In general, the term margin means the difference between a product's (or...

  • Should You Trade Stocks on Margin?

    Trading on margin is actually trading using money that you borrow from your brokerage firm. The stocks in your portfolio are the...

  • Definition of Book Value of Debt

    Organizations engage in borrowing to seek financing for operating activities, long-term initiatives and reorganization initiatives, such as mergers and acquisitions ...

  • What Is Cost or Market Value?

    Cost versus Market Value are terms used in inventory accounting by companies when preparing financial documents for shareholder reports. Generally accepted accounting...

  • Market Value of Debt

    The market value of debt refers to the replacement value of a receivable under present market conditions. This value is roughly equal...

  • Corporate Debt Recovery

    Bad debt affects a company's cash levels in the short term and long term. Department heads partner with segment managers to identify...

  • Margin in the Stock Market

    A stock brokerage account can be either a cash account or a margin account. A cash account requires the investor to pay...

  • How to Compute a Gross Margin

    Gross margin is the difference between the sale price of an item and the cost to produce it, or the cost to...

  • Margin Stock Definition

    Investing in the stock market has made many people rich. It has also made many people poor! Trading stocks has a high...

Related Ads

thumbnail
Featured