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<blockquote data-quote="Jackburton" data-source="post: 3348331" data-attributes="member: 34538">I know most of you don’t play in options, but a lot of traders use margin to leverage themselves to make more money. Margin is basically a line of credit with a floating rate. Your line is tied to the amount of equity in your account, stocks and cash for example.Brokerages require anyone trading or buying options maintain a level of “maintenance” money in the account. If that level of equity falls below a threshold, the trader will get what’s called a “margin call”. This means he has to make his account whole in order to maintain his credit line that he’s using for options. If the trader doesn’t come up with cash or equity to satisfy the margin requirements, the brokerage can sell any of his positions to make the account whole without telling the trader. I hope you can see where this is going, it starts a waterfall of selling and premature closing of positions.A lot of traders have been using margin in the last decade because rates have been so low, it’s been cheap money.&nbsp; The fear is when margin is more expensive where the spread is less and less, it’s harder to make money. Combine that with the above scenario, you have a full fledge meltdown in a very short time.This is very simplistic explanation of how this can unravel very quickly. My advice to anyone that’s heavy in the market right now, tune out the noise and keep investing, unless you’re in margin, in that case may god have mercy on your soul.</blockquote>

[QUOTE="Jackburton, post: 3348331, member: 34538"] I know most of you don’t play in options, but a lot of traders use margin to leverage themselves to make more money. Margin is basically a line of credit with a floating rate. Your line is tied to the amount of equity in your account, stocks and cash for example. Brokerages require anyone trading or buying options maintain a level of “maintenance” money in the account. If that level of equity falls below a threshold, the trader will get what’s called a “margin call”. This means he has to make his account whole in order to maintain his credit line that he’s using for options. If the trader doesn’t come up with cash or equity to satisfy the margin requirements, the brokerage can sell any of his positions to make the account whole without telling the trader. I hope you can see where this is going, it starts a waterfall of selling and premature closing of positions. A lot of traders have been using margin in the last decade because rates have been so low, it’s been cheap money. The fear is when margin is more expensive where the spread is less and less, it’s harder to make money. Combine that with the above scenario, you have a full fledge meltdown in a very short time. This is very simplistic explanation of how this can unravel very quickly. My advice to anyone that’s heavy in the market right now, tune out the noise and keep investing, unless you’re in margin, in that case may god have mercy on your soul. [/QUOTE]

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