Margin call

RECENT NEWS
Mondo Visione  Sep 12  Comment 
The Traded Options Market will be closed for business on 16 September 2016. In order to assure that safeguards are in place against potential market risk that may arise during the aforesaid period when some of the major markets are open, the...
Financial Times  Jul 19  Comment 
Tumble in Vanke share price highlights risk from Baoneng's high-leverage strategy
Mondo Visione  Jun 28  Comment 
The Traded Options Market will be closed for business on 1 July 2016.  In order to assure that safeguards are in place against potential market risk that may arise during the aforesaid period when some of the major markets are open, the Clearing...
Mondo Visione  Mar 24  Comment 
The Traded Options Market will be closed for business on 4 April 2016.  In order to assure that safeguards are in place against potential market risk that may arise during the aforesaid period when some of the major markets are open, the Clearing...
Mondo Visione  Feb 1  Comment 
Today, Tokyo Financial Exchange (TFX) applied the Intraday Additional Margin Call of Interest-rate Futures contracts for the first time since 14 March 2011 as the Three-month Euroyen futures market soared. ・What is the Intraday Additional...
The Economic Times  Jan 21  Comment 
Corporates that borrowed cheap dollars to prune cost are now grappling with margin calls from lenders as the rupee continues to slide.
Yahoo  Jan 20  Comment 
In a telephone interview, Gundlach said he did not expect the high-yield junk bond market to bottom out unless the volatility index rises over 40. "This is not stopping any time soon," Gundlach said. The CBOE Volatility Index was up more than 17...




RELATED WIKI ARTICLES

Related Articles

 
TOP CONTRIBUTORS

A stock broker's demand on a margin-indebted investor, made if the investor's debt in the investment increases above the maximum allowable, to increase the amount of cash or other collateral in the equity to bring the investor's margin debt back down to the maximum allowable level (or preferably for the broker, lower).

Example

A man purchased 100 shares of a $100 stock on a 50% margin two months ago (meaning he paid $5000 initially, and owes another $5000 to his broker). Since then the stock's value has decreased to $90 a share. Since a 50% margin is the maximum allowable by most brokerages, the man receives a margin call from his broker. The broker tells the investor he needs to put another $1000 into the equity to bring it back up to its minimum maintenance margin of 50%. If the investor are unable to do this in a timely manner, the broker will have the right to sell whatever stocks/equity assets of the investor's his brokerage controls to bring the investor's account up to its minimum required margin (and in most cases without needing to consult the investor himself).

Historical Significance

Black Thursday, Monday and Tuesday, the single-day stock market drops occurring on October 24, 28 and 29, 1929 respectively, were all the result of a market-unbearable number of concurrent margin calls made during a severe fall in land prices. Since the maximum allowable margin debt back then was 90% (meaning only a 10% equity investment was required up-front, while 90% of the asset's initially-purchased value could be paid back in the future) and most investment speculation at the time was on land, a vast majority of those who received margin calls were far too cash-poor to bring their investments back to their minimum required margins. This resulted in a historically unprecedented sell-off which ultimately crippled the U.S. Economy for close to a decade (commonly referred to as "The Great Depression").

Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki