Margin

• Margin is the mechanism by which you can borrow funds from your broker account but you are required to cover your potential risk liability with liquid assets in your account.  This is particularly relevant to those traders who sell short, sell naked or trade net credit spreads.
• When you sell short, sell naked or trade a net credit spread, while money is deposited into your account, there is still (in most cases) a contingent liability risk which must be covered by sufficient funds in your account.
• These funds can either be represented in cash or "marginable securities".  A marginable security is defined as an asset which is deemed by the brokerage to be secure enough to stand as collateral against your risk on the trade.  A stock like SLB may well be considered as a marginable security, while low priced stocks (under $10.00) with little trading history, low trading volumes, poor liquidity and high volatility may not be considered as acceptable collateral.
• Remember that in many cases of selling short and selling naked, your potential risk liability may be unlimited (or at least substantial).  Using the Strategy Analyzers to determine your risk profile will help you to identify those situations where your risk potential is unacceptably high, depending on your own personal appetite for risk.