Liquidation Margin
Categories: Trading
A lot of times, people use their own money to invest in securities. But in some instances, we can borrow money from our brokerage firm and buy securities with that instead. When we do this, that account is known as a “margin account.”
Margin accounts allow us to invest with borrowed money, and all we have to do is pay interest on what we borrow. This is great if we end up making money, but it can be bad news bears if we don’t. Because if we lose the firm’s money, then not only do we have to pay them back for the losses, but we’ve also got those pesky interest payments to worry about.
Anyway, when we have a margin account, the value of the equity positions held in it is referred to as our “liquidation margin.” In other words, if we’re holding short positions (sell now, buy later), then our liquidation margin refers to what we’ll owe when we buy. And if we’re holding long positions (buy now, sell later), then our liquidation margin is what we’ll have after the sale. If our liquidation margin is less than our margin call, our broker might go ahead and liquidate all or part of our account to make up for the discrepancy.
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Finance allah shmoop What is liquid market Well it's one
that trades Ah lot High volume Lots of buyers Lots
of sellers Liquid lots of cash sloshing this way In
that way Go this way and that Did you ever
see a liquid market go this way and that That
little song Did you ever see a lassie Never mind
All right Weir Liquid markets Good Well because they implied
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put to work And that's usually a sign of a
healthy risk seeking active market versus risk averse one which
is you know hiding Ah liquid market means that investors
want to put their cash toe work that they have
actually saved cash along the way and or that they
have relatively easy access to credit And you can think
about it from the perspective of your kindly loving realtor
who wants a world where lots of people are buying
homes But in orderto have that happen you have to
have lots of people who are also selling homes at
the same time Otherwise prices just go higher and higher
with no supply to meet demand And at the end
of the day in real estate and it's in the
stock market while the most important thing yes that the
brokers get pays So that's a liquid market one that
trades a lot like it's Wet trading back and for
sloshing around not ice Where everything's you know all jammed 00:01:22.109 --> [endTime] up No needs heat or an animal or something