What Is a Maintenance Margin?

Maintenance margin is the smallest ratio of equity in the investor's margin account to the total market value. If the investor's margin account falls below the minimum maintenance margin (which may occur when the stock price falls), the investor will receive a margin call notification from the broker specifying the amount of cash that should be added to the margin account, The investor failed to deposit additional cash, and the broker had the right to sell the securities in the investor's account. ^[1]

Margins in futures trading and credit trading can be divided into two types, that is, initial margin and maintenance margin.

The so-called maintenance margin refers to the completion of financing or margin trading.

After the investors have sold the options, they need to ensure that the funds on the account are sufficient in accordance with the margin requirement of the operating institution every day. If the required margin is close to or even exceeds the client's total funds, the securities company will issue a notice to the client to increase the margin. If the client fails to transfer funds in time within the prescribed period, the obligatory position held by him may be subject to

The so-called initial margin refers to the cash delivered by investors when they engage in credit transactions to buy or sell securities. The ratio between the amount of initial margin and the total value of securities purchased or sold should meet the minimum standards prescribed by the securities authorities. This ratio is determined based on the credit situation, inflation trends, and the market conditions of margin trading. For example, the US Federal Reserve often adjusts the initial margin ratio, which is usually 50% (that is, half of the total price of the securities purchased or sold by commission), the minimum ratio is 40%, and the maximum ratio is 100% (that is, full margin trading, not Allow margin financing and margin trading). In general, the US Federal Reserve will increase the margin ratio to suppress speculation when the market is too hot, and will lower the margin ratio to stimulate trading when the market is too cold. ^[2]

In the exchanges managed by the maintenance margin system, if your losses are small and your margin amount is reduced, it is still higher than the maintenance margin limit, so you do nt need to increase the price change margin, only your loss reaches You need to increase the margin for price changes only when the margin level is lower than the maintenance margin. Make the account funds equal to the initial margin level, of which the additional funds are called variable margin.