Margin Call

A Margin call is a demand by a brokerage firm to an investor to deposit additional Money or Securities into their Margin account to bring it up to the required minimum level. This occurs when the value of the Securities in the account falls below a certain threshold, triggering a requirement to maintain the minimum Margin level.

For instance, if an investor purchases $10,000 worth of Stock using $5,000 of their own Money and $5,000 borrowed on Margin, and the Stock’s value drops to $7,000, the investor may receive a Margin call requiring them to deposit more funds or liquidate some Assets to cover the lost value.

In another case, suppose an investor has a Margin requirement of 50%. If the Equity in their account falls below this percentage due to a decline in Stock prices, the broker will issue a Margin call, prompting the investor to act quickly to avoid forced Liquidation of their Assets.