What does "Maxed out" Mean?
The term "maxed out" refers to the exhaustion of all available resources. In a financial context, it may refer to a credit card, a bank account, or cash on hand. Where financial investments are concerned, this term may relate to margin requirements or funds available for the acquisition of financial assets. Maxed out can also relate to the maximum price an investor is willing to pay for an asset.
A bank account or savings account is maxed out when it is nearly empty. This term may describe a credit card or line of credit that has nearly reached its limit. Whether something is nearly filled up or emptied out, the term may still be appropriate. Generally speaking, when something is maxed out, it has reached its limit.
Financial investing may involve cash accounts or margin accounts. Trading a cash account is the simplest form of commerce. A person may say the account is maxed out when no available funds remain and no more assets can be purchased. Subsequent transactions will not be honored.
Trading a margin account is a bit more complicated. In an equity traded margin account, the broker lends the trader a portion of the investment funds. It is quite common to invest more funds than are available in the account. An account may be described as maxed out when the trader's funds and the borrowed funds have reached the limit, or if the assets purchased lose value.
In a futures account, the initial good faith deposit is sufficient to control the asset being purchased. This situation is known as leverage. If the underlying asset loses value, a maintenance margin must be maintained. Assuming the account does not have enough funds to meet the maintenance margin, the trading account would be maxed out. A margin call will be issued.
The price of a financial asset may be nearing a high point. Once the cost of the asset becomes more than buyers are willing to pay, the price is considered to be maxed out. The price of the asset will soon lose value due to the law of supply and demand.
The limit up rule refers to the maximum amount a commodity price can advance in one session. The commodity price could be maxed out at this price and trading halted.
Maxed out is sometimes used to describe circumstances in other aspects of life. Just about everyone is maxed out in relation to one thing or another. The term is sometimes used to refer to people being fed up, or objects being filled or emptied.
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