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.

BREAKING DOWN '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. Broker

    1. An individual or firm that charges a fee or commission for ...
  5. Liquidate

    1. To convert assets into cash or equivalents by selling them ...
  6. Clowngrade

    An upgrade or downgrade of a security for reasons considered ...
Related Articles
  1. Markets

    A Look At Corporate Profit Margins

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

    How Does Your Margin Grow?

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

    Margin Trading

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

    Broker-Dealer Industry 101: The Landscape

    Independent broker-dealers are a great choice for experienced, self-starter planners who have established practices.
  5. Brokers

    Explaining Market Orders

    A market order is the most common order used to purchase a financial security.
  6. Term

    What is Financial Technology?

    Financial technology, or fintech, is a financial services sector that emerged in the 21st century.
  7. Investing Basics

    What's a Brokerage Account?

    A brokerage account is a contractual arrangement between an investor and a licensed securities broker or brokerage.
  8. Investing Basics

    Is Your Broker Churning Your Account?

    Is your broker churning your account to generate fees? Here's how to know and what recourse you have.
  9. Investing Basics

    Shareholders: Vote Your Proxy and Be Heard

    Voting shares, in person or via proxy ballot, is a right every shareholder should exercise. Here's why.
  10. Professionals

    What Does a Broker Do?

    In the investment world, broker is a term used to refer to an individual or entity that helps facilitate trading in financial securities.
RELATED FAQS
  1. Why is the Demarker Indicator Important for analysts and traders?

    The DeMarker Indicator is a technical price oscillator that compares a security's price maximums and minimums over specific ... Read Full Answer >>
  2. 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 ... Read Full Answer >>
  3. 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 ... Read Full Answer >>
  4. 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 ... Read Full Answer >>
  5. What is the interest rate offered on a typical margin account?

    Interest rates on margin accounts vary according to the size of the loan and the brokerage firm being used. Generally, interest ... Read Full Answer >>
  6. What is the cost of a share purchase?

    When investors purchase shares of stock, the price paid includes two components: the price of the stock and the fee charged ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  2. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  3. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  4. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  5. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  6. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!