In finance, a margin is collateral that the holder of a position in securities, options, or futures contracts has to deposit to cover the credit risk of his counterparty. This risk can arise if the holder has done any of the following:borrowed cash from the counterparty to buy securities or options,sold securities or options short, orentered into a futures contract. The collateral can be in the form of cash or securities, and it is deposited in a margin account. On U.S. futures exchanges, margin is formally called performance bond.
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A sum, usually smaller than but part of the original margin, which must be maintained on deposit at all times. If a customer's equity in any futuresposition drops to, or under, the maintenance margin level , the broker must issue a margin call for the amount at money required to restore the customer's equity in the account to the original margin level. Related: margin, margin call.
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