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Margin Call

A margin call (additional margin requirement) refers to additional margin that a securities firm requires an investor to deposit when, in margin trading, market fluctuations cause the margin maintenance ratio to fall below a certain level.

How It Arises

A margin call arises when, for example, an expanding unrealized loss on a position held in margin trading causes the ratio of the margin's assessed value (the margin maintenance ratio) to fall below the level set by the securities firm. Once a margin call arises, additional margin must be deposited by the deadline set by the securities firm.

Points of Caution

If you are unable to respond, for example by depositing additional funds, by the deadline, your open positions may be forcibly settled (liquidated) by the securities firm. Because margin trading is a leveraged form of trading, it is necessary to understand that a sudden market move can result in losses or a margin call larger than expected.

This article is provided for general informational purposes only and does not recommend or solicit the purchase or sale of any specific investment method or security. Final investment decisions are your own responsibility.

Frequently Asked Questions

What happens when a margin call occurs?
You are required to deposit additional margin by the deadline set by the securities firm. If you are unable to respond by the deadline, your open positions may be forcibly settled.
How can a margin call be avoided?
Commonly cited approaches include trading with a comfortable margin maintenance ratio and keeping leverage low, but there is no way to completely avoid sudden market swings, so the occurrence of a margin call cannot be reliably prevented.

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