Buying securities on margin means using credit provided by the broker, with account assets serving as collateral. The loan can magnify both gains and losses, and interest adds to the cost.
Account equity and liquidation
Initial and maintenance requirements depend on the security, applicable rules and the broker's house requirements. Firms can impose stricter requirements and liquidate positions under the account agreement. Do not assume that a warning or extra time will be provided before a sale.
Options and margin are different questions
Most long options must be paid for in full, with exceptions for eligible long-dated contracts under applicable rules. Short-option margin instead supports the writer's obligation; it is not a cap on loss. Portfolio margin and strategy-based margin can produce different requirements.
See option margin requirements and futures performance-bond margin. Neither a payoff diagram nor our calculators determines the amount a broker will require.
Content reviewed:
Primary references: FINRA margin rules; Cboe margin guidance. Editorial standards.