Which of the following statements regarding margin trading is true?
A) Its major appeal is to institutional investors.
B) It maximizes returns and minimizes losses.
C) It magnifies both gains and losses.
D) It is considered a strictly speculative tool.

Question

Quizplus · Accepted Answer

Margin trading involves borrowing money to invest in securities, which can magnify both gains and losses depending on the movement of the market. This is because the investor is able to control a larger position than they could with their own capital alone, amplifying the outcome of their investment, whether it's a gain or a loss.

Which of the Following Statements Regarding Margin Trading Is True