How Does Margin Work

[ub3rn00ber]

How does margin work?

[clavocat]

How does margin work?

your broker lets you borrow 100% of what you have, so if you have 10k they let u borrow 10k and you pay a % just above prime rate, scottrade charges 10% i believe. so you pay for half the security and your broker pays for the other half. so in a sense you put up 10k for a stock and they put up 10k for a stock, and that stock goes up 10% you make 2000 off of the 20000 but you only put up 10k so you actually make 20%, but it works on the way down too, if you lose 10% your actually losing 20%, 2000/10000= .2= 20%. for some usless info, margin used to be 80% back in the 30's which helped cause the crash because people were only putting up 20% for their stocks. you also need margin if you want to trade more, something about you need 3 days to clear a trade and if you have margin you can trade more, and in scottrade i dont think you can short without margin.

[Will]

don't do it

[clavocat]

don't do it

i beg to differ, if you pretend you dont have one you wont use it, and if you need 1000 bux its there for you, jmo.

[bahroor]

your question copied and pasted in Google...

http://www.google.com/search?hl=en&q=How+does+margin+work%3F&btnG=Google+Search

Please note that Google is a popular search engine, it is a tool for finding resources on the World Wide Web. Google scans web pages to find instances of the keywords you have entered in the search box.

[bahroor]

i beg to differ, if you pretend you dont have one you wont use it, and if you need 1000 bux its there for you, jmo.

But you do agree that it is not a tool for beginers, yes?

[Will]

I have used it occasionally while waiting for other funds to settle, but as a general rule it is not a good idea to risk money that you don't own, especially for an extended period of time.