Why do some stocks have a higher margin requirement?
It is a question of how volatile the stock is perceived to be, its beta correlation to the S&P500 or other index. Margin requirements are derived from the Federal Reserve, Self Regulatory Organizations, the exchange itself, the broker you use, and which margining system you are using. So that makes this a loaded question. There are at least three margin systems, before you have your own risk officer in a glass room that doesn't care how leveraged up you get. Brokers primarily don't want to lose money. It's about how volatile the instrument is. Brokers are concerned not about you but about potential lawsuits stemming from their perceived inadequate risk management - letting you trade extremely volatile stocks with high leverage.  On top of that they run the risk of losing money in scenarios where a trader shorts a stock with all of the funds, the company rises 100% or more by the next day, in which case the trader owes money to the broker. If you look in detail you'll see that many of the companies with high margin requirements are extremely volatile pharmaceutical companies which depend heavily of FDA approvals.
"The margin money you put up to fund a short position ($6000 in the example given) is simply a ""good faith"" deposit that is required by the broker in order to show that you are acting in good faith and fully intend to meet any potential losses that may occur.  This margin is normally called initial margin.  It is not an accounting item, meaning it is not debited from you cash account.  Rather, the broker simply segregates these funds so that you may not use them to fund other trading.  When you settle your position these funds are released from segregation.   In addition, there is a second type of margin, called variation margin, which must be maintained while holding a short position.  The variation margin is simply the running profit or loss being incurred on the short position.  In you example, if you sold 200 shares at $20 and the price went to $21, then your variation margin would be a debit of $200, while if the price went to $19, the variation margin would be a credit of $200.   The variation margin will be netted with the initial margin to give the total margin requirement ($6000 in this example).  Margin requirements are computed at the close of business on each trading day.  If you are showing a loss of $200 on the variation margin, then you will be required to put up an additional $200 of margin money in order to maintain the $6000 margin requirement - ($6000 - $200 = $5800, so you must add $200 to maintain $6000).  If you are showing a profit of $200, then $200 will be released from segregation - ($6000 + $200 = $6200, so $200 will be release from segregation leaving $6000 as required). When you settle your short position by buying back the shares, the margin monies will be release from segregation and the ledger postings to you cash account will be made according to whether you have made a profit or a loss.  So if you made a loss of $200 on the trade, then your account will be debited for $200 plus any applicable commissions.  If you made a profit of $200 on the trade then your account will be credited with $200 and debited with any applicable commissions." "The question mentions a trailing stop. A trailing stop is a type of stop loss order. It allows you to protect your profit on the stock, while ""keeping you in the stock"". A trailing stop is specified as a percentage of market price e.g. you might want to set a trailing stop at 5%, or 10% below the market price. A trailing stop goes up along with the market price, but if the market price drops it doesn't move down too. The idea is that it is there to ""catch"" your profit, if the market suddenly moves quickly against you. There is a nice explanation of how that works in the section titled Trailing Stops here. (The URL for the page, ""Tailing Stops"" is misleading, and a typo, I suspect.)" "But what happen if the stock price went high and then go down near expiry date? When you hold a short (sold) call option position that has an underlying price that is increasing, what will happen (in general) is that your net margin requirements will increase day by day.  Thus, you will be required to put up more money as margin to finance your position.  Margin money is simply a ""good faith"" deposit held by your broker.  It is not money that is debited as cash from the accounting ledger of your trading account, but is held by your broker to cover any potential losses that may arise when you finally settle you position.   Conversely, when the underlying share price is decreasing, the net margin requirements will tend to decrease day by day.   (Net margin is the net of ""Initial Margin"" and ""Variation Margin"".) As the expiry date approaches, the ""time value"" component of the option price will be decreasing." Usually when a company is performing well both its share price and its dividends will increase over the medium to long term. Similarly, if the company is performing badly both the share price and dividends will fall over time. If you want to invest in higher dividend stocks over the medium term, you should look for companies that are performing well fundamentally and technically. Choose companies that are increasing earnings and dividends year after year and with earnings per share greater than dividends per share. Choose companies with share prices increasing over time (uptrending). Then once you have purchased your portfolio of high dividend stocks place a trailing stop loss on them. For a timeframe of 1 to 3 years I would choose a trailing stop loss of 20%. This means that if the share price continues going up you keep benefiting from the dividends and increasing share price, but if the share price drops by 20% below the recent high, then you get automatically taken out of that stock, leaving your emotions out of it. This will ensure your capital is protected over your investment timeframe and that you will profit from both capital growth and rising dividends from your portfolio. Because someone smarter than you by 50 IQ points (a quant) will depart their larger position long before you have a chance to see it coming. Your stop losses are useless as the market will open with the issue below your sell price. Your trade even if place at the same mine would settle after theirs. don't piss in the tall grass with the big dogs. If they are wrong or right does not matter you will be haircut or whipsawed. "The short answer is that it depends on the industry. In other words, margin alone - even in comparison to peers - will not be a sufficient index to track company success.  I'll mention Apple quickly as a special case that has managed to charge a premium margin for a mass-market product.  Few companies can achieve this. As with all investment analysis, you need to have a very clear understanding of the industry (i.e. what is ""normal"" for debt/equity/gearing/margin/cash-on-hand) as well as of the barriers-to-entry which competitors face. A higher-than-normal margin may swiftly be undermined by competitors (Apple aside).  Any company offering perpetual above-the-odds returns may just be a Ponzi scheme (Bernie Maddof, etc.).  More important than high-margins or high-profits over some short-term track is consistency of approach, an ability to whether adverse cyclical events, and deep investment in continuity (i.e. the entire company doesn't come to a grinding halt when a crucial staff-member retires)." Consider the case where a stock has low volume.  If the stock normally has a few hundred shares trade each minute and you want to buy 10,000 shares then chances are you'll move the market by driving up the price to find enough sellers so that you can get all those shares.  Similarly, if you sell way more than the typical volume, this can be an issue. "This is a good question and my answer below, being the first rationale that crossed my mind, is far from fleshed-out. It's just a reply based on many books on the historical cycles of markets and it's something I've discussed at work (I work in finance).   Historically we can observe that periods of financial ""booms"" entailing high valuations of public equities tend to lead to lower returns. It's a fairly simplistic notion, but if you're paying more now for something - when it's potentially close to a high water mark - then you're returns in the short term are likely to be somewhat stunted. Returns from the underlying companies have a hard time keeping up with high valuations such that investors aren't likely to see a bountiful return in the short run." "Some investors worry about interest rate risk because they Additional reason is margin trading which is borrowing money to invest in capital markets. Since margin trading includes minimum margin requirements and maintenance margin to protect lender ""such as a broker""  , a decrease in the value of bonds might trigger a threat of a margin call There are other reasons why investors care about interest rate risk  such as spread trade investors who benefit from difference in short term/ long term interest rates. Such investors borrow short term loans -which enables them to pay low interest- and lend long term loans - which enables them to gain high interest-. Any disturbance between the interest rate spread between short term and long term bonds might affect investor's profit and might even lead to losses. In summary , it all depends on you investment objective and financial condition. You should consult with your financial adviser to help plan for your financial goals." Funds can't limit themselves to a small number of stocks without also limiting themselves to a small amount of total investment. I think 25 companies is too small to be practical from their point of view. I would think there would be heavy overlap between companies that do well and market cap. You're not going to get to largest market cap without being well managed, or at least in the top percentile. After all, in a normal distribution, the badly managed firms go out of business or never get large. For margin, it is correct that these rules do not apply.  The real problem becomes day trading funding when one is just starting out, broker specific minimums. Options settle in T+1. One thing to note: if Canada is anything like the US, US options may not be available within Canadian borders.  Foreign derivatives are usually not traded in the US because of registration costs.  However, there may be an exception for US-Canadian trade because one can trade Canadian equities directly within US borders. "This is a complicated subject, because professional traders don't rely on brokers for stock quotes.  They have access to market data using Level II terminals, which show them all of the prices (buy and sell) for a given stock.   Every publicly traded stock (at least in the U.S.) relies on firms called ""market makers"".  Market makers are the ones who ultimately actually buy and sell the shares of companies, making their money on the difference between what they bought the stock at and what they can sell it for.  Sometimes those margins can be in hundreds of a cent per share, but if you trade enough shares...well, it adds up. The most widely traded stocks (Apple, Microsoft, BP, etc) may have hundreds of market makers who are willing to handle share trades.  Each market maker sets their own price on what they'll pay (the ""bid"") to buy someone's stock who wants to sell and what they'll sell (the ""ask"") that share for to someone who wants to buy it.   When a market maker wants to be competitive, he may price his bid/ask pretty aggressively, because automated trading systems are designed to seek out the best bid/ask prices for their trade executions.  As such, you might get a huge chunk of market makers in a popular stock to all set their prices almost identically to one another.  Other market makers who aren't as enthusiastic will set less competitive prices, so they don't get much (maybe no) business.  In any case, what you see when you pull up a stock quote is called the ""best bid/ask"" price.  In other words, you're seeing the highest price a market maker will pay to buy that stock, and the lowest price that a market maker will sell that stock.  You may get a best bid from one market maker and a best ask from a different one.  In any case, consumers must be given best bid/ask prices. Market makers actually control the prices of shares.  They can see what's out there in terms of what people want to buy or sell, and they modify their prices accordingly.  If they see a bunch of sell orders coming into the system, they'll start dropping prices, and if people are in a buying mood then they'll raise prices. Market makers can actually ignore requests for trades (whether buy or sell) if they choose to, and sometimes they do, which is why a limit order (a request to buy/sell a stock at a specific price, regardless of its current actual price) that someone places may go unfilled and die at the end of the trading session.  No market maker is willing to fill the order. Nowadays, these systems are largely automated, so they operate according to complex rules defined by their owners.  Very few trades actually involve human intervention, because people can't digest the information at a fast enough pace to keep up with automated platforms. So that's the basics of how share prices work.  I hope this answered your question without being too confusing! Good luck!" That's true. So instead, they brute force the exchange with buy orders before they know if there's even any demand for the equity. Most of these get cancelled.  If they see someone else placing a large buy order, they let theirs go through and do not cancel. They meet the ask and get the order because they don't care about getting the best deal.   The buy order the HFT sent through is for the entire book. The HFT can then demand the highest price possible. After that, they dump the unsought portion of the book back into the market.  Regulation have cracked down on this practice. However, that just means HFT have decided to build their own exchanges.  The HFT buy order was placed before they even knew there was anyone else looking for the same buy. Link only answers aren't good, but the list is pretty long. It's a moving target, the requirement change based on a number of criteria. It usually jumps to force you to sell when you hold a losing position, or when your commodity is about to skyrocket.