Open Position

Any stock or equity which is owned is said to be an open position. An active

trader may have several open positions at any given time. An open position
may be a long position or a short sale. An open position will fluctuate freely
in value as market conditions change -- that is, as the price of the underlying
equity of an open position rises and falls. Generally speaking, a long-term
investor routinely holds one or more open positions for days or even years at
a time, while a day trader may wish to close, or off-set, any open positions
before or at the close of trading each day. Day traders often see a danger in
holding an open position overnight, while a long-term investor is not as
fearful of short-term market fluctuations which affect the day-to-day price of
an open position. An open position becomes a closed position when the stock
is sold or the open position is off-set (as in the case of a short sale).

Collateral (finance)
In lending agreements, collateral is a borrower's pledge of specific property to a
lender, to secure repayment of a loan.

Margin (finance)
In finance, a margin is collateral that the holder of a financial instrument has to
deposit to cover some or all of the credit risk of his counterparty (most often his
broker or an exchange).

Margin buying
Margin buying is buying securities with cash borrowed from a broker, using other
securities as collateral. This has the effect of magnifying any profit or loss made on
the securities.

The securities serve as collateral for the loan. The net value, i.e. the difference
between the value of the securities and the loan, is initially equal to the amount of
one's own cash used.

This difference has to stay above a minimum margin requirement, the purpose
of which is to protect the broker against a fall in the value of the securities to the
point that the investor can no longer cover the loan.

Examples:
Jane buys a share in a company for $100, using $20 of her own money, and $80 borrowed from
her broker. The net value (share - loan) is $20. The broker wants a minimum margin requirement
of $10.

Suppose the share goes down to $85. The net value is now only $5 (net value ($20) - share loss
of ($15)), and Jane will either have to sell the share or repay part of the loan (so that the net value
of her position is again above $10).