Stock market 1929 buying on margin
The Stock Market Crash of
Buying on Marginalso known as Margin Buyingis the practice of buying shares or securities using money borrowed from a broker. Since the purchased securities themselves are the collateral backing up the loan, buying on margin can be a risky business indeed!
What margin buying does is to inflate any profit made on a rise in share values - and on the downside, exaggerate any loss should the share price fall. Buying on margin is not only practiced with stocks, but also options and futures.
The Stock Market Crash of
Margin requirements today are stringently controlled, but such was not always the case. During the Roaring Twenties, it was felt that the rising stock market was a self-perpetuating phenomenon and both investors and brokers were eager to ride the wave ever higher.
Hopes were dashed and fortunes crumbled, however, in October of when a series of sharp drops in share values forced investors to sell their equities in order to meet their margin commitments. Bargain hunters could not reverse the flood of sell orders and the result was the Stock Market Crash ofone of the most options trading forexfactory stock market crashes in history.
While buying on margin itself was not stock market 1929 buying on margin only cause of the crash, it was recognized as a significant factor contributing to its severity, and securities reform legislation in the s was intended to tighten the regulations concerning margin lending.
More recent market crashes, such as those in and were deemed to have been exacerbated by program trading and an Asian stock market correction, respectively.
Stock Market Crash of - Buying on Margin
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