Glossary
Margin account
A brokerage account that lets the holder borrow from the broker against securities to buy more or to sell short.
A margin account is a brokerage account in which the broker lends you money, using the securities in the account as collateral. It lets you buy more than your cash alone would allow, sell stocks short, and trade some options strategies, and it lets you spend proceeds from a sale immediately rather than waiting for settlement. The cost is interest on the loan and the risk that losses are magnified and can exceed what you deposited.
How it works (US rules, 2026)
Opening one means signing a margin agreement and receiving a margin disclosure statement. Then:
- Minimum equity: at least $2,000 before you can borrow (FINRA Rule 4210).
- Initial margin: under the Federal Reserve's Regulation T you can borrow up to 50% of the purchase price of most listed stocks.
- Maintenance margin: equity must stay at or above 25% of the position's market value, and usually higher under the firm's house rules.
- Interest: charged daily on the loan balance at a rate the broker sets, usually tiered by the size of the loan.
What changes compared with a cash account
The margin agreement usually allows the broker to lend out your securities, so dividends on lent shares may be paid as "substitute payments" taxed differently. Day trading in margin accounts is governed by FINRA's intraday margin standard, which replaced the old pattern-day-trader rule from June 4, 2026, with firms allowed to phase it in until October 20, 2027. Not every security is marginable; many low-priced and recently listed stocks are not.