The formula for calculating the price at which a margin call is expected is shown below. Learn More → Hedge Fund Primer Margin Call Price Formula With that said, a margin call implies that the securities purchased (and thus, the account value) have declined in value to where the minimum threshold is no longer met.Ĭertain brokers send out warnings to investors trading on margin if an account is close to no longer meeting a requirement, but margin calls specifically request the investor to either: Maintenance Margin: The minimum percentage that investors must maintain in their margin accounts for their positions to remain open.Initial Margin: The minimum percentage that investors must contribute before purchasing an asset using the margin loan.leverage) to make investments comes with certain requirements, namely the initial and maintenance margin. However, the optionality to utilize borrowed capital (i.e. investors can borrow funds from a brokerage to make investments instead of using their money.įor instance, if an investor has contributed $10,000 of their own capital to the account, which has a margin of 50% - the investor can purchase up to $20,000 worth of securities because the remaining $10,000 is borrowed from the broker.

Margin calls are triggered when investors trading on margin have an account value below the minimum requirement.Ī margin account is a method for investors to purchase securities on margin, i.e. The Margin Call Price refers to the minimum equity percentage expected to be held in a margin account before resulting in a margin call.

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