Collateral that a company, a brokerage or an exchange deem as acceptable for satisfying margin requirements. When an investor wants to borrow money from a broker for the purpose of buying on margin, marketable securities can be posted as collateral instead of cash. However, not all securities can be accepted by brokers. Certain stocks (especially those with low prices) may not be acceptable as collateral. Even if an investor feels ready for margin trading, it not always advised to borrow the entire eligible margin amount, be it 50% or 70%. In order to maintain a buffer in case of price drops, investors are normally recommended to use only some of the eligible margin amount.
November 19, 2023