Margin.

In plain English

Margin is borrowing money from your broker to buy more securities than your cash balance supports. The securities themselves serve as collateral for the loan. Margin amplifies both gains and losses: if you put up $50,000 of cash and borrow $50,000 to hold $100,000 of stock, a 10% gain doubles your equity (great); a 10% loss wipes out 20% of your equity (less great). If losses push the equity below the broker's maintenance margin requirement, the broker issues a margin call requiring more cash or the forced sale of holdings at the worst possible time.

01Why it matters

Margin is one of the few retail trades where you can lose more than you put in. A typical pattern: a bull market makes margin look free, an investor builds a large margin position, and then a 30% market drop produces both a portfolio loss and a forced sale at the trough. The cost is permanent in a way that an unborrowed loss is not.

02The math, step by step

Investor deposits $50,000 cash and uses 2x margin to buy $100,000 of an ETF. The ETF falls 40%. The position is now worth $60,000 against a $50,000 loan. Equity is $10,000, down from $50,000, an 80% loss on a 40% move. The broker issues a margin call; if not met, it sells at the bottom.

03What this is NOT

04Receipts

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