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<p>[QUOTE=&quot;WingedLiberty, post: 1168436, member: 26030&quot;]Let&#039;s say you have a brokerage account with a company like Fidelity or eTrade with $100,000 of your own cash in the account.</p><p><br /></p><p>You then can apply for a &quot;Margin Agreement&quot; between you and the brokerage firm.&nbsp; It&#039;s basically an agreement that they agree to lend you money at a certain rate of interest but you can only buy &quot;marginable securities&quot; with the money they lend you and you must have a certain percentage of those securities bought with your own cash.</p><p><br /></p><p>The securities noted above could be a stock like Apple (AAPL)&nbsp; ... or a Silver Fund (SLV)</p><p><br /></p><p>If the &quot;Margin Requirement&quot; of a security is 50%, you could then buy $200,000 worth of that security with your $100,000 in cash.&nbsp;&nbsp; The other $100,000 that you used to buy additional shares of the security, you actually borrowed from the brokerage firm.&nbsp; </p><p><br /></p><p>At the end of the month the brokerage firm will subtract the &quot;margin interest&quot; you accrued.&nbsp; When the dust settles and you sell everything, the brokerage firm will take their $100,000 back along with the interest you paid them over the time period.</p><p><br /></p><p>So basically using margin is like borrowing money to invest and it magnifies your gains (and losses).</p><p><br /></p><p><br /></p><p><br /></p><p><br /></p><p>When a brokerage house &quot;raises the margin&quot; on a security from say 50% to 70%.&nbsp; You cannot buy (or hold) as much of the security on &quot;margin&quot;.&nbsp; </p><p><br /></p><p>So in the case above, if they raised the margin requirement on SLV from 50% to 70%,&nbsp; you could only buy 1.42x (100/70) of the security instead of 2x (100/50). So if you had $200,000 worth of SLV in your brokerage account, but only $100,000 of your own money, you would have to sell $58,000 worth of your SLV to bring your holdings of SLV down to $142,000 to comply with the new higher margin requirement.</p><p><br /></p><p>So you can see whenever they raise the &quot;margin requirements&quot; on a security -- a lot of SELLING of that security follows (and all the selling makes the price drop) so that people are in compliance with the new higher margin requirement.</p><p><br /></p><p>Clear now?[/QUOTE]</p><p><br /></p>

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