Wall Street Words word of the day = Margin Account
Hello YouTube, Todd Ault here, and Welcome to Wall Street Words! Today's Wall Street term is "Margin Account"
One of my favorite things to trade on, margin. What does that mean? It means if you have one hundred thousand in your account, let's say, and you want to buy two hundred thousand worth of securities, you can do that if the underlying security is margin-able. Now, broker-dealers determine their own margin rates, and the interest rate you're charged. For example, with recent volatility, some stocks are not marginal. Some stocks under five dollars you can't borrow against. But traditionally stocks over five dollars listed on a national exchange can be margin-ed. Now, once you sign this margin agreement, you can buy and sell securities on credit. I do it all the time. Hedge funds do it all the time. It's a way of leveraging your return. However, when you're on margin and things go against you, you still got to pay it back. We all learned the hard lesson in two thousand eight and two thousand nine with margin. When you borrow too much on margin and the stock goes down, you can have a margin call, and if you don't meet it, your "Margin Account" will be liquidated. Today's word is "Margin Account" and an important trading tool I use every day to trade my account.
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