What is margin in stock market?

Question

I am new to stock marketing...

Thanks

Answer 1

margin is borrowed money that is used to invest.

definitely NOT for beginners, and almost always poison to any retail investor's portfolio.

Answer 2

The first answer you received, "margin is borrowed money that is used to invest", is margin debt, not margin.

More generally, in a brokerage account "margin" is a "sum deposited with a broker to cover risk of loss" or collateral.

For example, if I have $100,000 worth of GE stock in a margin account, my broker will allow me to borrow money using the stock as collateral. I can use that money to buy more stock, buy a car, or buy a $10,000 bottle of wine.

I can also use margin without borrowing money. For example, if I want to sell a stock short I am required to use margin to demonstrate I have the ability to purchase that stock (cover the short position) even if it goes up in value.

If you are talking about a business, instead of a brokerage portfolio, "margin" has a very different meaning. For example, if I buy something for $10.00 and sell it for $12.00 I say I had a profit margin of $2.00, the difference between the amount paid and received.

Depending upon the context, the word "margin" may be used either way when discussing the stock market.