In finance, margin is the collateral that an investor must deposit with a broker or exchange to cover the credit risk created when borrowing funds to buy financial instruments, selling assets short, or entering into derivative contracts.

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When trading on margin, investors borrow funds from their broker to buy securities, using the assets they purchase as security for the loan. This strategy enables them to take larger positions in the market than they could with just their own money, which can increase both profits and losses. If the account’s value drops below a certain threshold known as the maintenance margin, the broker may issue a margin call. In this case, the investor must either add more money to the account or sell some holdings to bring the balance back up to the required level.

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