Stock market basics
Margin call
Definition
A margin call is a demand from your broker to add cash or securities when the equity in a margin account falls below the maintenance requirement. FINRA sets that minimum at 25% of the market value of stocks bought on margin, and many brokers require more. If you do not meet the call, the broker can sell your positions without contacting you first.
Example
Say you buy $18,000 of stock with $9,000 of your own money and $9,000 borrowed, under a 25% maintenance requirement. If the position falls to $11,000, your equity is $2,000, below the $2,750 required, so the broker issues a margin call for $750. If you do not deposit it in time, the broker can sell shares to cover the gap.
Hypothetical numbers, for illustration only.
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