How much is the margin call? When a Margin Call occurs, you may either deposit funds or liquidate part of the positions you purchased on margin to cover the margin call. By depositing funds you decrease the amount of margin and increase your equity. By selling stocks, you decrease the amount of margin, therefore increase the percentage of the equity.
In general, if you would like to deposit funds, the amount has to be equal to the margin call amount. If you choose to liquidate your stocks to cover the call, the amount you have to sell should be equal to the margin call amount divided by the minimum maintenance requirement.
We are here to help. Get answers quick with Firstrade Virtual Assistant. No wait time! Margin Loans. Getting Started Cash vs. How can I avoid a Margin Call? Try not to use up your entire Margin Buying Power. Avoid a concentrated portfolio by diversifying your positions. Avoid trading on margin in highly volatile securities. Constantly monitor your account. The offers that appear on this site are from companies that compensate us.
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Bankrate has answers. Our experts have been helping you master your money for over four decades. Bankrate follows a strict editorial policy , so you can trust that our content is honest and accurate. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. But the event underscores that even as banks have been heavily buttressed with additional capital since the credit crisis in , there are players, like hedge funds and other investors, taking massive risks and regulators have little insight into their activities.
It also shows how difficult it is to monitor and contain the leverage, or borrowed money, that big time financiers use to amplify their bets. One way to do that is through derivatives like the ones Archegos appears to have used, said Craig Pirrong, a finance professor at the University of Houston. One way to deal with that concern is to force derivatives into a clearinghouse. The idea is to put all those trades into one centralized place, making it easier to monitor the buildup of risks and borrowing across different kinds of players instead of allowing that information to be fragmented among a bunch of banks who may not know what each is doing.
Banks and hedge funds often need the flexibility that can only come from specialized, bespoke contracts to hedge their risks and make bets. By providing your email, you agree to the Quartz Privacy Policy. Skip to navigation Skip to content.
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