Margin Call
A demand to add cash or securities after equity falls below maintenance.
What is Margin Call?
When account equity drops below the maintenance requirement, the broker demands additional funds. If the investor does not meet the call, the broker may liquidate positions - without permission and without regard to the investor's tax situation or price preference.
Margin Call: a worked example
Equity falls to 22% against a 30% house requirement. The broker calls for a deposit; no deposit by the deadline means positions are sold at market.
More terms in Positions & Trade Mechanics
Long Position
You own the asset and profit when its price rises.
Short Position (Short Selling)
You borrow shares, sell them, and profit if the price falls.
Margin
Borrowing from your broker to buy securities, using the account as collateral.
Cash Account
An account where every purchase is paid for in full, no borrowing.
Leverage
Using borrowed money to increase exposure relative to your own capital.
Initial Margin (Reg T)
The equity you must put up to open a margin position - generally 50%.
Maintenance Margin
The minimum equity percentage you must keep in a margin account.
Short Squeeze
Rising prices force short sellers to buy back, pushing prices higher still.