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. 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 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 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 >>
  6. What is the difference between fee-based advisors and commission-based advisors?

    The difference between a fee-based adviser and a commission-based adviser is that the former collects a flat fee for investment ... Read Full Answer >>
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. Economics

    What is Joint Tenants with Right of Survivorship?

    A type of brokerage account where a surviving member inherits the other member's share of account assets upon the death of that other member.
  5. Trading Strategies

    Why There's No Such Thing As A Stock 'Free Ride'

    If you're not familiar with freeriding and you're trading stocks, you should be. Although it sometimes happens unintentionally, it's illegal nonetheless.
  6. Professionals

    Top Strategies on How to Become a Stock Broker

    Gunning to be a stock broker and want an edge? Here's some veteran advice.
  7. Trading Systems & Software

    Steps to Starting Up an Independent Broker Dealer

    Launching your own broker-dealer is a lot of work, but the potential payoff is great, both personally and financially.
  8. Brokers

    Can Tradier's Brokerage API Replace Traditional Brokers?

    Tradier, an up-and-coming brokerage firm that’s carving a niche for itself as the world’s “first brokerage API company,” according to spokesperson Frances Del Valle.
  9. Investing Basics

    Explaining Market Value of Equity

    Market value of equity is the total value of all the outstanding stock as measured in the stock market at a particular time.
  10. Investing Basics

    What is Spread?

    Spread has several slightly different meanings depending on the context. Generally, spread refers to the difference between two comparable measures.

You May Also Like

Hot Definitions
  1. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  2. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  3. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  4. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  5. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  6. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
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!