Margin Call

Category: finance

A demand by a broker that an investor deposits additional money or securities so that the account balance is brought up to the minimum maintenance requirements.

Margin trading allows investors to borrow cash from the broker to buy more stock. If the value of those stocks drops, the broker’s risk increases. Once the account hits the maintenance threshold, the broker forces the investor to "top up" the account or they will liquidate the positions without notice.

Common Examples

• The rapid 20% correction in the energy sector triggered a margin call for the entire leveraged desk, forcing a fire-sale of our core holdings.
• Avoid leverage if you lack the cash reserves to withstand a sudden margin call during high-volatility market events.