Used margin
Family III · Risk
Not to be confused with free margin, margin, margin call, margin level.
Used margin is the amount of funds a broker sets aside from an account's equity to keep open positions. It is not a cost or a loss; it is collateral that remains committed until the positions are closed. The figure is the sum of the initial margin requirements for every open position, and it changes as positions are opened, closed, or adjusted.
How used margin is calculated
For each open position, the margin requirement is typically a percentage of the position's notional value, set by the broker and often varying by asset class, leverage, and regulatory jurisdiction. Used margin is the total of these individual requirements.
For example, if a broker requires 2% margin on a position with a notional value of $50,000, the used margin for that position is $1,000. If another position requires $500, total used margin is $1,500.
Worked example
Relationship to other margin metrics
Used margin is one component of a set of margin calculations. Free margin is equity minus used margin and represents funds available for new positions. Margin level is the ratio of equity to used margin, expressed as a percentage. A Margin call is triggered when that level falls below a broker-defined threshold. Margin is the broader concept of collateral required to hold positions.
Often confused with
- free margin
- Free margin is the equity remaining after used margin is subtracted, so it is the amount available for new trades, whereas used margin is the amount already committed; the visible sign is that free margin decreases when a new position is opened, while used margin increases.
- margin
- Margin is the general requirement or deposit needed to open and maintain a position, while used margin is the specific total of those requirements currently applied to open positions; the visible sign is that margin is a rate or concept, whereas used margin is a monetary amount shown in the account summary.
- margin call
- A margin call is a demand for additional funds or position reduction when equity falls below a required level, while used margin is the collateral already locked in open positions; the visible sign is that a margin call is an event or notification, whereas used margin is a persistent account figure.
- margin level
- Margin level is a ratio of equity to used margin expressed as a percentage, while used margin is the denominator in that calculation; the visible sign is that margin level is a percentage, whereas used margin is a currency amount.