What Is a Margin Call?

Finance
#1

When the value of an investor’s margin account falls below the broker’s necessary amount, a margin call happens. Securities purchased using borrowed money (usually a combination of the investor’s own money and money borrowed from the investor’s broker) are held in a margin account.
A margin call is when a broker requests that an investor deposit more money or securities into their account in order to bring it up to the maintenance margin, which is the minimal amount.
A margin call typically means that the value of one or more of the securities in the margin account has dropped. When a margin call comes, the investor must decide whether to add additional money to their account or sell part of their assets.

#2

A margin call is a warning message that occurs when a trader’s account is running out of sufficient funds to sustain their current open positions on the market.

If the market moves against a trader’s position/s, additional funds will be requested through a “margin call”.

If there are insufficient available funds, the trader’s open positions will be closed out

If a trader’s Equity (Balance - Open Profit/Loss) falls below a specific margin level which is the amount required to support open positions, then the trader’s positions will automatically be closed. This is to assist in protecting you from negative equity although you should not rely on us providing such protection. It is sensible to maintain adequate funding in your account.

You have two choices during a margin call:

  1. Put more money in your account to cover the call or
  2. Sell the stock to cover the call