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TeachMeFinance.com - explain Margin Margin -- an amount the lender adds to an index to determine the interest rate on an adjustable rate mortgage. another definition... margin -- (1) in futures trading, a specific dollar amount, set by each exchange, that both buyers and sellers must deposit as a guarantee that both will perform as agreed to make or take delivery during a designated period of time. The deposit is held by the clearing organization of the exchange. (2) in stock transactions, margin refers to the down payment required when borrowing from a broker to finance the purchase of stock. In this case, margin requirements may be set by the Federal Reserve Board, the Board of Governors of the Exchange or the broker. The margin is expressed as a percentage of the purchase price. another definition... Margin -- 1. In commercial terms the difference between the cost of goods sold and the total net sales price. 2. The purchase of a stock or a commodity with payment of only part of the purchase price in cash (called the margin) and the balance by loan (usually made by the broker.) historic definition... Margin -- The money deposited with a broker by a speculator in stocks or in grain, cotton, coffee, etc., to protect the broker against loss. When a stock advances or declines in price (as the case may be) to near the limit of the margin furnished the broker is privileged if the customer does not respond to a call for additional margin to sell the stock that has been bought or to buy back the stock that has been sold short. The broker is bound to give to the customer reasonable and customary notice when additional margin is required unless there is an agreement beforehand to the contrary. Stocks or bonds bought on margin by a broker for a customer are at all times, in the absence of an express agreement to the contrary, subject to the order of the customer. The customer has the right to possession of the stocks or bonds upon payment of the purchase price and the commissions and proper expenses. In the absence of an express agreement the broker may at his option upon reasonable notice require a customer to take up, that is, pay in full for the stocks which he is carrying for the customer. If the customer is short of stocks the broker may demand that he buy back the stocks or transfer the operation to another broker. About the author Mark McCracken Author: Mark McCracken is a corporate trainer and author living in Higashi Osaka, Japan. He is the author of thousands of online articles as well as the Business English textbook, "25 Business Skills in English". Copyright © 2005 by Mark McCracken, All Rights Reserved. TeachMeFinance.com is an informational website, and should not be used as a substitute for professional financial or legal advice. TeachMeFinance.com and its owner recommend consultation with a professional financial advisor prior to any investment or financial decision. Please read our disclaimer.