Low-Margin Securities

Low-margin securities are financial instruments that generate relatively small profit margins for investors or brokers. These securities may include highly liquid assets, such as government bonds or blue-chip stocks, that offer lower profit potential due to stable prices and low volatility. In trading, low-margin securities are often favored for their safety, but they may not provide substantial returns unless held in large volumes or combined with leverage.

Example

An investor trades U.S. Treasury bonds, which are low-margin securities, meaning the potential profits are small but relatively stable and low-risk.

Key points

• Securities that generate small profit margins, often due to low volatility and stable prices.

• Common examples include government bonds and blue-chip stocks.

• Favorable for conservative investors seeking safety but offer lower profit potential.

Quick Answers to Curious Questions

What are examples of low-margin securities?

Examples include government bonds, blue-chip stocks, and other low-volatility assets that offer modest profit margins.

Why do investors trade low-margin securities?

Investors trade them for their stability and low risk, although the profit margins are smaller compared to high-volatility securities.

How do brokers handle low-margin securities?

Brokers may earn lower commissions or fees on low-margin securities but benefit from their high trading volume and liquidity.