Initial Margin (Reg T)
The equity you must put up to open a margin position - generally 50%.
What is Initial Margin (Reg T)?
Regulation T, set by the Federal Reserve, requires an investor to deposit at least 50% of the purchase price of a marginable security when opening a position. Brokers may impose stricter house requirements.
Initial Margin (Reg T): a worked example
To buy $20,000 of stock on margin you must deposit $10,000 of your own equity.
More terms in Positions & Trade Mechanics
Long Position
You own the asset and profit when its price rises.
Short Position (Short Selling)
You borrow shares, sell them, and profit if the price falls.
Margin
Borrowing from your broker to buy securities, using the account as collateral.
Cash Account
An account where every purchase is paid for in full, no borrowing.
Leverage
Using borrowed money to increase exposure relative to your own capital.
Maintenance Margin
The minimum equity percentage you must keep in a margin account.
Margin Call
A demand to add cash or securities after equity falls below maintenance.
Short Squeeze
Rising prices force short sellers to buy back, pushing prices higher still.