Margin Call

Leverage holds significant potential, enabling borrowers to undertake larger projects than they would typically manage and possibly yielding greater returns on their initial investment. However, employing leverage, such as purchasing stocks on margin, also introduces the possibility of increased losses if the venture falls short of expectations—similar to facing a margin call. What Is a Margin Call? A margin call takes place when the proportion of an investor’s equity in a margin account dips below the broker’s required threshold. The margin account holds securities purchased with a mix of the…

Margin trading allows investors to use borrowed funds from a broker to make trades, which can amplify both potential profits and losses. However, there is a risk that losses can exceed the amount of money that the investor has in their account, leading to a margin call. In this article, we’ll take a closer look at what a margin call is, how it works, and how to avoid it. What Is a Margin Call? A margin call is a demand from a broker for an investor to deposit additional funds…