A margin call occurs when the equity in a margin account falls below the maintenance margin requirement. Brokers issue margin calls to protect themselves from losses, requiring traders to deposit additional funds or sell securities to restore the required equity level.

Margin Call Calculation

Equity Calculation

Equity = Market Value - Loan Amount
Market Value = Current Price × Shares Owned
Loan Amount = Initial Margin Required
Maintenance Margin = Market Value × Maintenance %

Margin Call Trigger

Margin Call when Equity < Maintenance Margin
Trader must deposit funds or sell securities
Failure to respond leads to forced liquidation
Liquidation at market price (may be unfavorable)

Liquidation Price Formula

When Positions Get Liquidated

The price at which positions are automatically closed

Long Position Liquidation

Liquidation Price = (Loan Amount) / (Shares × (1 - Maintenance %))
Price must fall to this level to trigger liquidation
Lower liquidation price = higher risk
Based on maintenance margin requirement

Short Position Liquidation

Liquidation Price = (Loan Amount) / (Shares × (1 + Maintenance %))
Price must rise to this level to trigger liquidation
Higher liquidation price = higher risk
Short sellers face unlimited risk

Margin Requirements by Asset

Asset Type	Initial Margin	Maintenance Margin	Key Considerations
Stocks (Reg T)	50%	25%	Standard margin for most stocks
Futures	5-15%	3-10%	Varies by contract and volatility
Options	20-100%	10-50%	Depends on strategy and risk
Crypto	10-50%	5-25%	High volatility, varies by exchange

Margin Call Response Options

Deposit Additional Funds

Add cash to margin account
Restores equity above maintenance level
Allows position to remain open
May require immediate deposit

Sell Securities

Reduce position size
Sell enough to meet margin requirement
May trigger tax consequences
Could result in losses

Buy In (Short Positions)

Cover short position
Buy back borrowed securities
Close out losing short position
Realize losses on the trade

Forced Liquidation

Broker sells position without consent
Occurs when margin call not met
May sell at unfavorable prices
Could result in significant losses

Risk Management Strategies

Position Sizing

Use appropriate leverage levels
Calculate position size based on risk tolerance
Consider volatility and liquidity
Leave margin of safety

Stop Loss Orders

Set automatic sell orders
Limit potential losses
Protect against margin calls
Use trailing stops for profits

Diversification

Spread risk across assets
Avoid concentration in single position
Use correlation analysis
Balance portfolio risk

Monitoring

Regular position review
Monitor margin levels daily
Set up margin call alerts
Have contingency plans

Margin Trading Benefits and Risks

Benefits

Leverage to amplify returns
Increased buying power
Portfolio diversification
Short selling capability

Risks

Amplified losses
Margin call risk
Interest expense
Forced liquidation

Regulatory Considerations

Pattern Day Trading

4+ day trades in 5 business days
Requires $25,000 minimum equity
Restrictions on margin usage
Applies to cash accounts

House Rules

Brokers can set stricter requirements
Concentration limits
Position size limits
Risk management policies

Key Takeaways for Margin Call Calculator

A margin call occurs when account equity falls below the maintenance margin requirement
Equity = Market Value of Position - Amount Borrowed from Broker
Liquidation price is the price at which the broker will automatically sell your position
Margin calls can be avoided by monitoring positions, using stop losses, and maintaining adequate equity
The calculator helps determine required margin, current equity levels, and liquidation prices
Always leave a margin of safety to avoid forced liquidation at unfavorable prices
Margin trading amplifies both gains and losses - use appropriate position sizing
Use the calculator to assess margin risk and plan your trading strategy accordingly

Margin Call Calculator

Position Information

Margin Requirements