Call Money Rate

What is the 'Call Money Rate'

The call money rate is the interest rate on a type of short-term loan that banks give to brokers who in turn lend the money to investors to fund margin accounts. For both brokers and investors, this type of loan does not have a set repayment schedule and must be repaid on demand.

BREAKING DOWN 'Call Money Rate'

Trading on margin is a risky strategy in which investors make trades with borrowed money. The advantage of margin trading is that investment gains are magnified; the disadvantage is that losses are also magnified. When investors trading on margin experience a decline in equity past a certain level relative to the amount they have borrowed, the brokerage will issue a margin call that requires them to deposit more cash in their account or to sell enough securities to make up the shortfall.

RELATED TERMS
  1. Call Money

    Money loaned by a bank that must be repaid on demand. Unlike ...
  2. Buying On Margin

    The purchase of an asset by paying the margin and borrowing the ...
  3. Margin Account

    A brokerage account in which the broker lends the customer cash ...
  4. Broker's Call

    The interest rate charged by banks on loans made to broker-dealers, ...
  5. Option Margin

    The cash or securities an investor must deposit in his account ...
  6. Minimum Margin

    The initial amount required to be deposited in a margin account ...
Related Articles
  1. Options & Futures

    Margin Trading: What Is Buying On Margin?

    The Basics Buying on margin is borrowing money from a broker to purchase stock. You can think of it as a loan from your brokerage. Margin trading allows you to buy more stock than you'd be able ...
  2. Trading Strategies

    Margin Investing Gets A Bad Rap, But For The Thrill-Seeker, It's Worth It

    Investing on margin can be profitable but it's a risky play that needs care.
  3. Active Trading Fundamentals

    Explaining Initial Margin

    Initial margin is the percentage of a stock’s price an investor must have in his account to buy that stock on margin.
  4. Investing Basics

    How Banks Set Interest Rates On Your Loans

    On the face of it, figuring out how a bank makes money is a pretty straightforward affair. A bank earns a spread on the money it lends out from the money it takes in as a deposit. The net interest ...
  5. Investing Basics

    Picking Your First Broker

    If you're a rookie investor, your first big investment decision should be an informed one.
  6. Personal Finance

    The Banking System: Commercial Banking - How Banks Make Money

    ByStephen D. Simpson, CFA As mentioned before, banks basically make money by lending money at rates higher than the cost of the money they lend. More specifically, banks collect interest on ...
  7. Options & Futures

    Different Needs, Different Loans

    Find out what options are available when it comes to borrowing money.
  8. Retirement

    Borrowing From Your Retirement Plan

    Left with no alternative but to take money out from your retirement savings? Here are some guidelines.
  9. Active Trading Fundamentals

    A Guide To Day Trading On Margin

    Buying on margin is a good option if you don't have the cash to day trade.
  10. Fundamental Analysis

    Calculating Net Interest Margin

    Net interest margin is a metric used to measure the effectiveness of a company’s investment decisions, particularly financial institutions.
RELATED FAQS
  1. How much can I borrow with a margin account?

    Understand the basics of margin accounts and buying on margin, including what amount investors can typically borrow for purchases ... Read Answer >>
  2. How does margin trading in the forex market work?

    When an investor uses a margin account, he or she is essentially borrowing to increase the possible return on investment. ... Read Answer >>
  3. What happens if I cannot pay a margin call?

    Minimum margin is the amount of funds that must be deposited with a broker by a margin account customer. With a margin account, ... Read Answer >>
  4. What is a margin account?

    A margin account is an account offered by brokerages that allows investors to borrow money to buy securities. An investor ... Read Answer >>
  5. What are the different types of margin calls?

    Learn the differences between margin calls and fed margin calls while reviewing the definitions of each and how to satisfy ... Read Answer >>
  6. What does it mean when I get a maintenance margin call?

    Understand how maintenance margin calls work, and learn about how margin requirements are different for trading stock versus ... Read Answer >>
Hot Definitions
  1. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  2. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  3. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  4. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  5. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  6. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
Trading Center