Margin

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Generally, margin, or profit margin, is the difference between a product or service’s selling price and the cost of production. See Investopedia. For example, if you pay 50 cents for a pencil and sell it for a dollar, your margin is 50%.

A margin can also refer to a payment made on account by a customer to a stockbroker to secure an agreement to purchase future stocks or other financial assets. See West v. Satterfield. A trader who frequently trades stocks or other financial assets with using margin payments may have a margin account. Similarly, for the purpose of bankruptcy, margin payment means “payment or deposit of cash, a security or other property, that is commonly known in the forward contract trade as original margin, initial margin, maintenance margin, or variation margin, including mark-to-market payments, or variation payments.” 11 U.S.C.A. § 101(38). That is, any payment by a debtor to pay for the purchase of securities or to reduce a deficiency in a margin account. See In re Stewart Finance Company.

[Last updated in August of 2020 by the Wex Definitions Team]