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Financial Glossary
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> "Initial margin" Definition |
 Initial margin
The returnable collateral deposited when initiating an open position. This is required by the clearing house from clearing members as protection against default of a futures or options contract. The exchange requires the level of initial margin set by the clearing house to be the minimum required by (clearing) members from their clients. The level is subject to changes in line with market conditions. See Margining.
Used in the context of general equities. 1) Amount of money deposited by both buyers and sellers of futures contracts to ensure performance of the terms of the contract; 2) amount of cash or eligible securities required to be deposited with a broker before engaging in margin transactions.
The payment which investors have to pay to a broker to trade on margin, commonly used in trading futures and contracts for difference. Initial margin is usually set at a percentage of the value of the contracts being traded. For example, a trader who buys long CFDs with a contract value of £12,000 might be required to deposit £2,400 (20%) with the broker as initial margin.The attraction of margin trading for traders is that they are effectively using the broker"s money to speculate, and if successful can get a higher return on investment than by only using their own money. Put another way, their £2,400 of cash buys them exposure to £12,000 of shares, whereas if they were trading the shares themselves it would give them exposure only to £2,400 of shares.The flip side is that margin trading magnifies losses as well as profits, so if the trader is unsuccessful it can be very risky.
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Glossary 
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Dictionary
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Initial margin - The returnable collateral deposited when initiating an open position. This is required by the clearing house from clearing members as protection against default of a futures or options contract. The exchange requires the level of initial margin set by the clearing house to be the minimum required by (clearing) members from their clients. The level is subject to changes in line with market conditions. See Margining.
Used in the context of general equities. 1) Amount of money deposited by both buyers and sellers of futures contracts to ensure performance of the terms of the contract; 2) amount of cash or eligible securities required to be deposited with a broker before engaging in margin transactions.
The payment which investors have to pay to a broker to trade on margin, commonly used in trading futures and contracts for difference. Initial margin is usually set at a percentage of the value of the contracts being traded. For example, a trader who buys long CFDs with a contract value of £12,000 might be required to deposit £2,400 (20%) with the broker as initial margin.The attraction of margin trading for traders is that they are effectively using the broker"s money to speculate, and if successful can get a higher return on investment than by only using their own money. Put another way, their £2,400 of cash buys them exposure to £12,000 of shares, whereas if they were trading the shares themselves it would give them exposure only to £2,400 of shares.The flip side is that margin trading magnifies losses as well as profits, so if the trader is unsuccessful it can be very risky.
Initial margin : the returnable collateral deposited when initiating an open position. this is required by the clearing house from clearing members as protection against default of a futures or options contract. the exchange requires the level of initial margin set by the clearing house to be the minimum required by (clearing) members from their clients. the level is subject to changes in line with market conditions. see margining.
used in the context of general equities. 1) amount of money deposited by both buyers and sellers of futures contracts to ensure performance of the terms of the contract; 2) amount of cash or eligible securities required to be deposited with a broker before engaging in margin transactions.
the payment which investors have to pay to a broker to trade on margin, commonly used in trading futures and contracts for difference. initial margin is usually set at a percentage of the value of the contracts being traded. for example, a trader who buys long cfds with a contract value of £12,000 might be required to deposit £2,400 (20%) with the broker as initial margin.the attraction of margin trading for traders is that they are effectively using the broker"s money to speculate, and if successful can get a higher return on investment than by only using their own money. put another way, their £2,400 of cash buys them exposure to £12,000 of shares, whereas if they were trading the shares themselves it would give them exposure only to £2,400 of shares.the flip side is that margin trading magnifies losses as well as profits, so if the trader is unsuccessful it can be very risky.
