Maintenance margin

The minimum share of a leveraged position's current value that must be your own equity rather than borrowed money, before the lender can demand more or close the position.

Example

With a 30% requirement on a $20,000 position carrying $10,000 of debt, a fall to about $14,286 puts equity at exactly 30% - roughly a 29% decline.

Important

The maintenance level, not the wipe-out level, is the number that actually ends most leveraged positions, and it is always reached first.

Related terms

• Leverage — Investing with borrowed money so that you control more of an asset than your own capital would buy. Gains and losses are both multiplied by the same factor.
• Margin call — A demand from a lender for more cash or collateral because the value of a leveraged position has fallen far enough that the equity in it is below the required level.
• Drawdown — The decline from an investment's highest point to its lowest point before it recovers.

Lessons that explain it

• Unlimited loss on the short side, spreads on every trade, and tax rules that vary by contract — Derivatives add risks shares do not have - assignment, margin calls, unlimited short losses - plus higher trading costs and tax treatment that differs by product and country. (13 min)
• Leverage: the same asset, a different outcome — Borrowing to invest does not change what you own. It changes how far the asset can fall before the decision is taken out of your hands. (11 min)

All 578 terms in the Investing glossary