Margin Call Question

What is a Margin Call? A Margin Call occurs when the value of the investor’s margin account drops and fails to meet the account’s maintenance margin requirement. An investor will need to sell positions or deposit funds or securities to meet the margin call.

What is the maintenance margin?

Key Takeaways. Maintenance margin is the minimum amount of equity that an investor must maintain in the margin account after the purchase has been made. Maintenance margin is currently set at 25% of the total value of the securities in a margin account as per FINRA requirements.

What is maintenance margin in derivatives?

The maintenance margin is the amount of money a trader must have on deposit in their account to continue holding their position, which is typically 50% to 75% of the initial margin.

What is maintenance margin in futures?

Maintenance Margin is the minimum amount of margin balance that you need to have in your account in order to keep your futures position valid. Maintenance margin is the minimum amount of money which your broker or the exchange require you to have in your account so that losses can be deducted from it.

What is margin maintenance requirement example?

For Example: You have $20,000 worth of securities bought using $10,000 in cash and $10,000 on margin. If the total value of your holding drops to $14,000 and the amount you borrowed on margin remains $10,000, your equity worth will only be $4,000, which falls below the 25% minimum margin requirement.

How is maintenance margin set?

Maintenance Margin Definition

Currently the Financial Industry Regulatory Authority (FINRA) sets the maintenance margin at 25% of the total value of securities that a trader holds in their margin account. Specific brokerage firms also maintain their own requirements.