Margin Trading

In the stock market, to trade on margin means to purchase or short stock on credit. When buying stock on margin, a customer can borrow up to 50% of the total cost from the brokerage firm. Margin customers are required to keep securities on deposit with their brokerage firms as collateral for their borrowings. Equity options and equity index options can now be purchased on margin, provided they have more than nine (9) months until expiration. The initial(maintenance) margin requirement is 75% of the cost(market value) of a listed, long term equity or equity index put or call option.

Margin Requirements for Option Writers

In options trading however, "margin" also refers to the cash or securities required to be deposited by an option writer with his brokerage firm as collateral for the writer's obligation. See margin requirements.

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