Margin

Margin is a term often used in stock market investing.

When stock is purchased on margin it is being bought not with actual funds, but with credit obtained through the ownership of other long stock. For example, if an investor owned 1,000 shares of TDBank, he may decide that the hottest investment at the present moment is Korean Air.

Because of his ownership in TDBank, and despite the fact that he has no cash, he can easily purchase $10,000 worth of shares in Korean Air on margin (or credit). If the firm loses him a substantial amount of money he can cover it with TDBANK shares, and if a profit is made it is done so with other people’s money (OPM) but his risk.

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