Margin call
Principles of Finance glossary · Financial Statements, Markets & Working Capital
Definition
A demand that a trader deposit additional funds to restore a margin account to the maintenance level.
Margin call in plain English
When you buy investments partly with borrowed money (called buying 'on margin'), the broker makes you keep a minimum amount of your own cash in the account as a safety cushion. If your investments fall in value, that cushion shrinks, and once it drops below the required level you get a margin call: a demand to add more money right away to rebuild the cushion. It is like a friend who lent you money for a bet phoning to say 'the bet is going badly, put in more of your own cash now or I sell your stuff to cover it.' If you cannot meet the call, the broker can sell your holdings to protect the loan.
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