Margin Call.

In plain English

When you buy investments with a margin loan, you are borrowing money from your broker using your own holdings as collateral. A margin call happens when those holdings fall in value enough that your equity (what you actually own after the loan) drops below the maintenance requirement the broker enforces. The broker then demands you either deposit more cash or sell positions to bring the account back in line. If you do not act fast, the broker can sell your holdings without asking you, and at a time and price you would not choose. This is one of the fastest ways an investor can be forced to crystallize losses.

01Why it matters

A margin call can force you to sell at the worst possible moment, at the bottom of a drop, turning a paper loss into a permanent one you had no say over.

02The math, step by step

You buy $20,000 of stock using $10,000 of your own money and a $10,000 margin loan. The stock falls and your account value drops to $13,000, leaving only $3,000 of equity against the loan. If that falls below the maintenance minimum, the broker issues a margin call demanding you add cash or sell. Under Federal Reserve Regulation T, your broker can lend up to 50% of the purchase price, so you must put up at least 50% to start; FINRA Rule 4210 then requires your equity to stay at or above 25% of the holdings' market value (firms can set higher house minimums). These figures are current as of 2026. First constructive step: meet the call quickly with a deposit if you can, and read your broker's margin agreement so you know exactly when they can sell without warning, which they are allowed to do.

03What this is NOT

04Receipts

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