1. What is a Margin Call?

A margin call occurs when the value of an investor's margin account falls below the broker's required amount. The investor must either deposit more money or sell some of the assets held in the account to meet the margin requirements.

2. How Does the Calculator Work?

The calculator uses the margin call formula:

Where:

• \( Loan\ Value \) — The amount borrowed from the broker (USD)
• \( Equity \) — The current value of the investor's position minus the loan amount (USD)
• \( Maintenance\ Margin \) — The minimum equity percentage that must be maintained (decimal)

Explanation: The formula calculates the amount needed to bring the account back to the maintenance margin requirement.

3. Importance of Margin Call Calculation

Details: Understanding potential margin calls helps investors manage risk, avoid forced liquidation of positions, and maintain adequate account balances.

4. Using the Calculator

Tips: Enter loan value and equity in USD, maintenance margin as a decimal (e.g., 0.25 for 25%). All values must be valid (loan value ≥ 0, equity ≥ 0, 0 ≤ maintenance margin < 1).

5. Frequently Asked Questions (FAQ)

Q1: What triggers a margin call?
A: When the account equity falls below the maintenance margin requirement, typically due to declining asset values.

Q2: How can I avoid margin calls?
A: Maintain adequate equity, use stop-loss orders, and monitor positions regularly.

Q3: What happens if I can't meet a margin call?
A: The broker may liquidate positions in your account to cover the shortfall.

Q4: Are maintenance margin requirements the same for all securities?
A: No, brokers may set different requirements for different securities based on volatility.

Q5: Can margin calls occur in both long and short positions?
A: Yes, margin calls can occur in both types of positions when equity falls below requirements.