Reading margin is improved in a MTJ designed for MRAM applications by employing a pinned layer with an AP2/Ru/AP1 configuration wherein the AP1 layer is a CoFeB/CoFe composite and by forming a MgO tunnel barrier adjacent to the CoFe AP1 layer by a sequence that involves depositing and oxidizing a first Mg layer with a radical oxidation (ROX) process, depositing and oxidizing a second Mg layer with a ROX method, and depositing a third Mg layer on the oxidized second Mg layer. The third Mg layer becomes oxidized during a subsequent anneal. MTJ performance may be further improved by selecting a composite free layer having a Fe/NiFeHf or CoFe/Fe/NiFeHf configuration where the NiFeHf layer adjoins a capping layer in a bottom spin valve configuration. As a result, read margin is optimized simultaneously with improved MR ratio, a reduction in bit line switching current, and a lower number of shorted bits.