what is margin call

A margin call is a demand made by a broker for an investor to deposit additional funds into their margin account to cover debt incurred while trading. Margin trading is a strategy that allows investors to purchase securities, such as stocks, with borrowed money. The hope behind the gamble is simple: A loan increases your purchasing power, which can magnify your gains. However, the possibility of a margin call is one of the key risks of margin trading. If the equity in an investor's margin account falls below the broker's required minimum, the account will be issued a margin call. The investor must then deposit additional funds or marginable securities in the account to meet the margin call. If the investor fails to do so, the broker may force the sale of assets in the account to meet the margin call. Margin calls can occur at any time due to a drop in account value, but they are more likely to happen during periods of market volatility.