To protect the margin loans they make, brokers issue a margin call if your equity in your margin account falls below the required maintenance level of at least 25%. Which account type should you choose? A margin call is the broker's demand that an investor deposit additional money or securities so that the account is brought up to the minimum value, known as the maintenance margin. That's 28.6% of the market value. In this sense, a margin call is a warning that might lead to an action if certain conditions are not met. He opened the account with $10,000 and borrowed $5,000. A maintenance margin is set after the initial purchase. Trading Forex & CFDs carries a high level of risk since leverage can work both to your advantage and disadvantage. Margin Call . At this point, will he receive a call? Definition: A margin call is a situation in which a broker will demand more funds be deposited in a margin account to increase the equity balance to the account minimum. Essentially, if the account balance falls too low because the securities purchased lose value, you will have to add more money to the account or else face a forced liquidation of your shares and some pretty hefty losses. All content on this website, including dictionary, thesaurus, literature, geography, and other reference data is for informational purposes only. Join USDT Prize Contest of PrimeBit, and win from 5000 USDT (Tether) every week. In other words, it is a claim made by a broker in which the investor must increase his account balance to meet the minimum maintenance margin. At this point, will he receive a call? To protect the margin loans they make, brokers issue a margin call if your equity in your margin account falls below the required maintenance level of at least 25%. You might also get a margin call if you trade futures contracts and the value of your account drops below the required maintenance level. 1, A demand from a clearinghouse to a clearing member, or from a brokerage firm to a customer, to bring margin deposits up to a minimum level required to support the positions held. A margin call is ordered whenever the investor’s personal funds within the account falls below the minimum % agreed upon, called the maintenance requirement. The NYSE mandates that investors place at least 25% of their own money in a margin account, but brokerage firms are known to require much more. Margin call. Trading on margin involves taking a loan from your broker in order to leverage your long position or go short stocks in the market. Further downgrades left MF Global's credit rating at "junk" or speculative grade, indicating a company at risk of default, and triggered a new round of, even in the best-case scenario, where the option expires leaving the seller to bank the premium, unexpected, Li Shiu-li, general manager of Jih Sun Securities Investment Consulting, advised investors to stay away from life-insurance shares and weak electronic shares, as they will face heavy pressure for, The financers, including non- banking finance companies ( NBFCs) and stock brokers who arrange funds for promoters, offloaded huge volume of pledged stocks due to a, Burns told the Wall Street Journal it was the first time since 1987 that he's faced a, Some grain elevators, a key conduit for farmers to sell their grain to the market and hedge their risks through futures contracts, are having trouble raising enough working capital to cover their, Relentless falls in the Mothers market and other Japanese venture firms-oriented stock markets made some investors face, It said: "As the prices of crude oil were at an all time high at above 55 US dollars per barrel, the company faced significant, As WorldCom began to show signs of financial difficulty, the debtor's stockbroker sold his shares as they decreased in value to meet, Dictionary, Encyclopedia and Thesaurus - The Free Dictionary, the webmaster's page for free fun content, Deutsche Bank Wins [pounds sterling]146m Compensation Against Sebastian Holdings' [pounds sterling]5bn Lawsuit [VIDEO], the potential pitfalls of naked options laid bare, Amount of margin loans for Taiwanese stocks plunges, Passing the stress test: grain co-ops and lenders work as a team to meet unprecedented credit needs during '08, REFILING: LEAD: Tokyo shares battered broadly, sending Nikkei to 4-week low, Chinese Oil Trader Loses $550M In Derivatives, marginal efficiency of capital/ investment, marginal productivity theory of distribution. That's 28.6% of the market value. Margin Call is the smartest movie you will ever see about the Financial Crisis. He recently opened a margin account with Gold Financial, LLC to increase his trading activities. According to the concept we previously discussed, a call is triggered when the equity balance of the account goes below the minimum maintenance margin set by the broker, which in this case is 25 percent.