We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

How do I Resolve a Margin Call?

Mary McMahon
By
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

To resolve a margin call, investors can close out a position, deposit securities or cash to meet the margin, or allow the broker to sell securities from the account. When investors open margin accounts, it is advisable to read the terms of the agreement with care so they will know what to expect when the broker issues a margin call. If investors do not respond to the request to address the margin requirement, the broker is allowed to sell securities from the investor's account without receiving explicit permission to do so.

In a margin account, investors borrow money from a brokerage to make investments. The law usually requires a minimum deposit in such accounts in the form of a percentage of the total loan. This can be provided in cash or securities. If the stocks an investor holds decline in value, the amount on deposit falls, and it is possible to fall below the margin requirement. The broker will issue a margin call to ask the investor to correct the issue.

Investors holding open positions can close them to resolve the margin call. This may involve buying or selling securities, depending on the position. The broker can execute these orders on request from the customer and will work on getting the best possible deal for them. If the investor was planning on closing the position anyway, this may be a sound solution to the problem.

Another option is to deposit more cash or securities. Investors should have funds available in other accounts and can rapidly transfer them to the broker to meet the margin requirement. The investor should alert the broker to expect an incoming transfer from another financial institution, so the broker knows not to sell securities to resolve the problem. If the broker does not receive the deposit or there is a problem, she will contact the investor.

The investor can also do nothing, forcing the broker to sell securities, or specifically tell the broker to sell some of the securities in the account. The broker will decide which securities to sell on the basis of current values and the need, unless the investor provides particular directions. Brokers want to protect the financial interests of their clients, and thus are unlikely to make poor sales decisions when selling securities to meet a margin call. If a client feels a broker has breached fiduciary duty with a sale, it can be grounds for a lawsuit.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a SmartCapitalMind researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Related Articles

Discussion Comments
By SarahSon — On May 19, 2011

If you are new to trading, it is good to know about trading on margin, but I would give yourself some time before using it. It can be easy to get carried away with all the extra buying power, and if your positions do not go the way you want them to, you could be issued a margin call. If you don't have any extra cash to meet that call, you will have to sell something in your account.

I have done a lot of stock and options trading and they all carry a certain amount of risk - the same goes with trading on margin. You need to keep a close eye on your investments at all times, and not assume anything.

By John57 — On May 17, 2011

I have received a few margin calls over the years. I usually will sell something in my account to cover the call. I know that if you do not meet their deadline, and don't take any action, your broker will go ahead and sell securities for you. That is probably not the way you want to handle it. It would be best if you made the decision of what you want to sell in your account if you don't want to deposit more cash.

Before ever opening up a margin account I would recommend that you really understand a margin call definition. Even after that, I would use a virtual account before trading with real money on margin.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.