Exhaust Price

AAA

DEFINITION of 'Exhaust Price'

A discount price at which a broker must liquidate a client's equity position, which was purchased on margin, to meet a margin call. The stocks are sold at the exhaust price when the client cannot provide the funds or refuses to maintain the margin.

INVESTOPEDIA EXPLAINS 'Exhaust Price'

When a client buys stock on margin, he or she is borrowing money from the broker to enter into a position. A sharp price decline in the asset will produce a margin call, where the holder of the assets must provide additional cash to back his or her borrowing. The exhaust price is usually set to the value that would cover the margin balance, protecting the brokerage from a defaulted loan.

RELATED TERMS
  1. Margin Call

    A broker's demand on an investor using margin to deposit additional ...
  2. Margin Account

    A brokerage account in which the broker lends the customer cash ...
  3. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin ...
  4. Liquidate

    1. To convert assets into cash or equivalents by selling them ...
  5. Broker

    1. An individual or firm that charges a fee or commission for ...
  6. Discretionary Investment Management

    A form of investment management in which buy and sell decisions ...
Related Articles
  1. Trading Strategies

    Why is the Demarker Indicator Important for analysts and traders?

    Read about the rationale behind the DeMarker Indicator, a technical price oscillator that compares current trends to past trends for the same security.
  2. Markets

    A Look At Corporate Profit Margins

    Take a deeper look at a company's profitability with the help of profit margin ratios.
  3. Options & Futures

    How Does Your Margin Grow?

    Risk-management tool SPAN margin boosts profitability prospects by helping to determine when to exit a trade.
  4. Options & Futures

    What is the difference between leverage and margin?

    In financial terms, leverage is reinvesting debt in an effort to earn greater return than the cost of interest. When a firm uses a considerable proportion of debt to finance its investments, ...
  5. Active Trading Fundamentals

    Why do you need a margin account to short sell stocks?

    The reason that margin accounts and only margin accounts can be used to short sell stocks has to do with Regulation T, a rule instituted by the Federal Reserve Board. This rule is motivated by ...
  6. Active Trading Fundamentals

    How is margin interest calculated?

    Before running a calculation you must first find out what rate your broker-dealer is charging to borrow money. The broker should be able to answer this question. Alternatively, the firm's website ...
  7. Options & Futures

    Margin Trading

    Find out what margin is, how margin calls work, the advantages of leverage and why using margin can be risky.
  8. Professionals

    How to Choose a Robo-advisor? Follow the Money

    Which of the many robo-advisors will still be around in a decade? Here's an informal look at who might thrive and who might simply survive.
  9. Investing Basics

    Why Do Penny Stocks Fail?

    Penny stocks are speculative and highly risky investments. Lack of government and stock exchange oversight and general information leaves penny stock investors open to sudden losses.
  10. Brokers

    Do You Know How To Beat Your Broker?

    Want more returns? Give less of it to your broker! Keep your costs down, starting with broker costs.

You May Also Like

Hot Definitions
  1. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  2. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  3. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  4. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  5. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  6. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
Trading Center