The amount that is set aside to ensure that the margin

Solution

Maintenance margin is the amount of capital that must be available in the account to keep a leveraged trade open. It ensures that there is always have enough money to fund the present value of the position and cover any running losses. Let’s say you want to go long on 100 shares of company ABC, which are currently trading at 500. This means that the full value of your position is 50,000. However, because you’re trading on leverage, you only need to put up an initial deposit of 20%. Your margin deposit is therefore 10,000 (50,000 x 20%). You have 10,000 in your account when you decide to place the trade, which is enough to cover your margin requirement. But if the money in your account falls – as a result of your position losing money – you would be placed on margin call immediately. This is because you do not have any additional funds with which to cover your losses. To keep your position open, you would need to top up your account to get your balance above 10,000. The amount of money you’d be required to deposit is your maintenance margin. If your balance fell to 9800, for example, you’d need to add 200 to your account.