week 2 - margin trading

Question 1

what is buying on margin?

Answer 1

Borrowing money to purchase shares. It gives you the ability to invest more than you would be able to just using your own cash

Question 2

when margin buying, what is mean by the initial margin requirement (IMR)?

Answer 2

is the difference between investment value and loan value (i.e. the minimum % initial investor equity)

Question 3

how often does the margin change? and when can a margin call be initiated?

Answer 3

margin changes daily. margin call can be initiated when the price of the asset falls below a certain level

Question 4

what is meant by maintenance margin requirements?

Answer 4

minimum account borrower’s equity can be before additional funds must be put into account