What is the difference between maintenance margin and initial margin?

Initial margin is the deposit you need to open a margin purchase, 50% under Regulation T. Maintenance margin applies from then on and is lower: FINRA's minimum for long stock is 25% of the market value, though most brokers use a higher house figure. You meet the first once per purchase and the second every day you hold the loan.

Can my broker raise the maintenance requirement on a stock I already own?

Yes. Margin agreements let the firm change house requirements at any time, for one stock or the whole account, and the new figure applies to positions you already hold. A raise can put an account below the line without any move in price, so a requirement change deserves the same attention as a drop in the stock.

Maintenance Margin: The Equity Floor Under a Margin Account

Account equity: 24.2%. That line on a statement, or its equivalent on the balance screen, is the number the broker’s risk system watches, and it is below the level that FINRA sets as the least a long stock position on credit can carry. Nothing about the loan changed. The stock fell, the equity absorbed the whole fall, and the percentage slipped through the floor.

The rule and who sets it

FINRA Rule 4210 is where the minimum lives. For stock you own on margin, equity must stay at 25% or more of the position’s current market value. For stock you have sold short at $5 a share or higher, the floor is whichever is larger: $5 per share, or 30% of market value.

Those are minimums. Most firms run higher ones.

A position slipping below 25%

Look at the last two lines together. The FINRA floor leaves you $250 short, which a small deposit covers. A hypothetical house figure of 30% leaves you $1,900 short on exactly the same account, and it would have tripped earlier, at a market value of about $35,714 ($25,000 / 0.70), because a 30% floor meets the falling equity line sooner. The broker enforces its own number. Plan with that one.

Why the percentage falls faster than the stock

The loan is fixed in dollars. Every dollar the stock loses comes out of your equity alone. A position that dropped 17.5%, from $40,000 to $33,000, took equity from $15,000 to $8,000, a fall of nearly 47%. That asymmetry is the reason maintenance margin exists at all: the lender wants a cushion between the collateral and the debt that is still there when the price moves against you for a few days running.

You can find the exact price at which a given position crosses the line. The margin call calculator does it for any share count, loan and requirement, and the margin call price is knowable argues that you should write that price down before you buy.

House requirements move

A broker can raise its requirement on a single stock after a large move, ahead of earnings, or because your holding has grown to a large share of the account, and it can raise it for every client at once during a volatile market, which may well be the same week your other holdings are down and spare cash is short. The agreement you signed allows this, and it usually applies to positions you already hold. So an account sitting at 32% equity can be fine on Monday and short on Tuesday with no change in price, if the house figure for that stock moves from 30% to 40%.

Short stock has its own floor, and the dollar-per-share test matters for cheaper shares. Short 1,000 shares at $10, and 30% of the $10,000 market value is $3,000, while $5 a share is $5,000. The larger number applies. At $50 a share the percentage test is the bigger one, since 30% of $50 is $15.

What people get wrong

People often read 25% as the working figure. Your broker probably uses a higher one. Another mistake is checking maintenance only at the account level when one concentrated position carries a higher house rate than the rest, so the blended figure looks safe while the broker is computing a larger requirement line by line. And many treat a maintenance shortfall as a warning to think about, when it is the trigger for a margin call with a deadline the broker picks.

Initial margin covers the purchase itself. A margin call is the demand that follows a breach. Equity, on a statement, is market value minus the debit balance, and the debit balance grows each month by the margin interest posted to it, which moves you toward the floor even on a quiet day.