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Key Takeaways
- A margin call requires the account to meet an initial, maintenance or applicable house requirement.
- For the worked long-stock account, equity equals stock value minus the margin loan.
- At $60 per share, the account has $2,000 equity against a $3,000 requirement, a $1,000 deficiency.
- A $1,000 cash deposit or the specified sale of 67 shares restores the worked requirement.
- Use the broker’s account requirement and execution record to reconcile the complete position.
What is a margin call?
A margin call is a broker’s demand that an account meet its applicable margin requirement by adding cash or securities or by reducing positions. An initial call addresses a position-opening requirement. A maintenance call addresses the ongoing requirement, while a house call applies the broker’s house requirement.
How to meet a margin call: cash deposit or share sale
For a simple long-stock account, equity equals stock market value minus the margin loan. Compare that equity with the applicable maintenance requirement to calculate the surplus or deficiency.
The example buys 200 shares at $100 with $10,000 cash and a $10,000 loan. At $60, the shares are worth $12,000 and equity is $2,000. A 25% maintenance requirement is $3,000, leaving a $1,000 deficiency.
A separate $1,000 cash deposit meets that requirement with the other inputs unchanged. To calculate a stock sale, divide the deficiency by the maintenance rate: $1,000 ÷ 25% = $4,000. At a specified $60 execution, 67 whole shares produce $4,020.
After applying those proceeds to the loan, the remaining shares are worth $7,980 and the loan is $5,980. Equity remains $2,000, while the maintenance requirement falls to $1,995. The account has a $5 surplus with zero fees and interest.
Formula
Long-stock equity = shares × price − loan; maintenance deficiency = maintenance rate × stock value − equity- A positive deficiency is the shortfall in the worked long-stock account.
- The maintenance equality price is loan ÷ [shares × (1 − maintenance rate)].
- With the price and rate fixed and sale proceeds repaying the loan, minimum sale value = deficiency ÷ maintenance rate.
Worked Example
A trader buys 200 shares at $100 with $10,000 cash and a $10,000 loan. The worked maintenance rate is 25%. At $60, compare a cash deposit with a sale at $60, holding the rate fixed and setting fees and interest to zero.
- Stock value: 200 × $60 = $12,000
- Equity: $12,000 − $10,000 = $2,000
- Required equity: 25% × $12,000 = $3,000
- Deficiency: $3,000 − $2,000 = $1,000
- Cash alternative: deposit $1,000 to meet the requirement
- Sale alternative: $1,000 ÷ 25% = $4,000 minimum sale value
- Whole-share sale: 67 × $60 = $4,020
- After sale: $7,980 stock value − $5,980 loan = $2,000 equity
- New requirement: 25% × $7,980 = $1,995; surplus: $5
The cash deposit meets the original requirement. The specified 67-share sale repays $4,020 of the loan and reduces the maintenance requirement to $1,995, leaving a $5 surplus. Both calculations use the stated unchanged inputs.
What price triggers a margin call in a long-stock account?
In a long-stock account, equity falls below the maintenance requirement once the price drops under the maintenance equality price: loan ÷ [shares × (1 − maintenance rate)]. The example’s maintenance equality price is $66.67. This measures the long-stock account against a constant 25% requirement. The broker’s account terms and actual execution record determine how a deficiency is handled.
Margin calls for options and intraday trading
Options use their own requirements. FINRA requires full margin for listed long options with nine months or less remaining. Eligible listed long options with more than nine months remaining have a 75% rule requirement. Short options and portfolio-margin accounts follow their applicable calculations.
The intraday framework addresses margin created by trading activity. FINRA permits firms to implement real-time prevention or calculation of the day’s intraday deficits. Its transition runs through October 20, 2027, so use the framework implemented by the broker for the account.
The options profit calculator shows the position’s maximum loss and its payoff across prices before you open it; hold those numbers against the buying power and maintenance requirement in the broker’s margin calculation.
Risks and limitations of margin calls
- Treat a call as a deadline the broker controls. The margin agreement lets it close positions without first issuing a call, and the broker chooses what to sell.
- Sell more than the minimum in a falling market. A price that keeps falling during the sale raises the deficiency, so 67 shares no longer cover it at a lower fill, and fees and interest come out of equity too.
- Size the cushion from the broker’s house rate, which sits at or above the 25% rule minimum and changes on the broker’s terms.
- Restore more than the call amount. Meeting the call restores the requirement only at the current price: after the 67-share sale the account has a $5 surplus, so a small further decline creates a new deficiency.
Bottom line
A margin call means the account has fallen short of a margin requirement and must add equity or reduce positions. Know the price that triggers the call, compare a deposit with a sale before you need either, and remember that the broker can close positions without waiting for you to act.
Clear answers
Frequently Asked Questions
Sources and Further Reading
- FINRA: Know What Triggers a Margin Call
- FINRA Rule 4210: Margin Requirements
- FINRA: Understanding the New Intraday Margin Requirements
- FINRA Key Topics: Margin Accounts
How entries are sourced, calculated and updated: editorial methodology.