Cash and marketable securities an investor deposits with a broker to guarantee that the former will honor or keep up with his obligation as to a short position in an underlying share price in case the underlying price gets bullish- i.e., increases from initial level or beyond a specific level. A margin account allows the holder to buy on margin, sell short, and purchase specific types of derivatives.

Opening a margin account requires making a minimum initial deposit in cash or qualifying securities (whose value is marked to market for changes over time). The amount of initial deposit varies from an exchange to another, and a brokerage firm to another. For short selling and buying on margin transactions, the account holder has also to pay interest on any borrowed cash or securities through his/ her margin account, and the loan must be repaid at the end of its term.

In concept, it is similar to the margin account for futures contracts.