A:

A maintenance margin call is a requirement to place more money into an account that is trading on margin to hold the current positions. In a margin account, the broker lends money to the investor to trade stock; the loan is collateralized by the securities and cash in the account. If the value of the securities in the margin account drops below a certain level, the investor receives a margin call. The account holder must then bring the value of the account up to the minimum maintenance margin requirement. If the margin call is not met, the account may be subject to forced liquidation of the assets in the account. A margin call may also be the result of a drop in value for option positions on stocks contained in an account.

Margin requirements differ based upon the asset being traded. FINRA Rule 4210 governs the margin requirement for accounts trading stocks. This is different from an account that is used to trade futures. In a futures trading account, the initial margin requirements are set by the exchanges and may vary across the type of product being traded. For example, the initial margin for one futures contract of corn may be $1,100, while the initial margin for an oil contract may be $5,000. Further, the margin amounts for futures are regularly updated by the exchanges depending on the value and volatility of the underlying contract. The margin in a futures account serves as a financial guarantee that both buyers and sellers of futures contracts will meet their financial obligations. Investors should understand how margin works for their accounts before trading stocks or futures contracts.

RELATED FAQS
  1. What are my options when I get a margin call?

    Understand what a margin call means and the two primary options for meeting a margin call, such as depositing additional ... Read Answer >>
  2. How is buying on margin regulated by the Securities and Exchange Commission (SEC)?

    Learn how FINRA and the Federal Reserve regulate margin account trading, and understand how pattern day trading can impact ... Read Answer >>
  3. How are margin calls regulated by the SEC?

    Learn how FINRA and the Federal Reserve Board regulate trading in margin accounts, and see how brokers can liquidate positions ... Read Answer >>
  4. Do you have to sell your stocks when you get a margin call?

    Understand the implications of a margin call and what an investor's options are when the stock he purchased on margin falls ... Read Answer >>
  5. What is the difference between extensive margin and intensive margin in economics?

    Find out why it is important for traders to understand the difference between initial margin requirements and maintenance ... Read Answer >>
  6. How exactly does buying on margin work and why is it controversial?

    Learn how purchasing stock on margin works, and understand the risk associated with margin accounts that make the strategy ... Read Answer >>
Related Articles
  1. Trading

    Margin Trading

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

    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. Financial Advisor

    Margin Call

    Find out why a margin call is so important to investors.
  4. Investing

    The Advantages Of SPAN Margin

    Find out how it provides futures and commodity option strategists with more bang for their margin buck!
  5. Investing

    Spreading The Word About Portfolio Margin

    An underused opportunity provided in an SEC rule can enhance returns and lower risk for spread traders.
RELATED TERMS
  1. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin ...
  2. Cross Margining

    An offsetting position where market participants are able to ...
  3. Margin

    1. Borrowed money that is used to purchase securities. This practice ...
  4. Margin Account

    A brokerage account in which the broker lends the customer cash ...
  5. Variation Margin

    A variable margin payment that is made by clearing members to ...
  6. Margin Loan Availability

    1. The dollar amount in an existing margin account that is currently ...
Hot Definitions
  1. Debt/Equity Ratio

    The D/E ratio indicates how much debt a company is using to finance its assets relative to the value of shareholders’ equity.
  2. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange.
  3. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  4. Return On Equity - ROE

    The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability ...
  5. Bond

    A bond is a fixed income investment in which an investor loans money to an entity (corporate or governmental) that borrows ...
  6. Whole Life Insurance Policy

    A life insurance contract with level premiums that has both an insurance and an investment component. The insurance component ...
Trading Center