What Is a Margin Call?

A margin call is a demand from a broker or other financial institution that an investor deposit additional money or securities into their account. This occurs when the value of the assets in the account falls below certain levels, known as maintenance requirements. The purpose of this requirement is to ensure that investors have enough capital to cover any potential losses on their investments.

When an investor receives a margin call, they must either add more funds to their account or sell some of their existing holdings in order to meet the required level of equity. If they fail to do so within a specified period, then the broker may liquidate some or all of their positions without prior notice in order to protect themselves and other customers from further losses. It’s important for investors to understand how margin calls work and what steps need to be taken if one is received in order for them not only avoid such situations but also maximize returns on investment over time.

See also  Relay Nodes

Related Posts

Leave a Reply

Your email address will not be published. Required fields are marked *