Margin has different meanings in business and market context. Margin in stock markets can be the loan availed by a broking institution in order to make investments in equity and other related instruments. Margin also means the difference in price which the big distributor retains after buying goods directly from the manufacturer and then passes these on to wholesalers/retailers. The profit is the distributor’s ‘margin’ In stock markets, ‘Margin’ is defined as the difference between the amount of money a client has borrowed from the brokerage firm and the total worth of his/her investment portfolio.
Buying on ‘Margin’ is a common phenomenon and it entails keeping some money or assets as ‘security’ or ‘collateral’ and then availing balance as ‘credit’ from the Broker. In this buying on ‘margin’ the broker is the lender and the asset in the investor’s account is the collateral or security.