Is a Margin Call an Indication That the Trader Has Realized a Loss?
Yes, a margin call is a direct indication that the trader has incurred a realized loss that has reduced their account equity below the maintenance margin level. The MTM process daily converts paper (unrealized) losses into realized cash losses (variation margin outflow), and the margin call is the demand to replenish the account after those realized losses have been deducted.
Glossar
Account Equity
Valuation ⎊ Account equity, within cryptocurrency, options, and derivatives, represents the residual claim on an account’s assets after deducting all liabilities, functioning as a real-time measure of net worth exposed to market fluctuations.
Realized Loss
Exposure ⎊ The concept of realized loss, particularly within cryptocurrency derivatives and options trading, fundamentally represents the negative financial consequence stemming from a position’s unfavorable outcome.
Margin Call
Trigger ⎊ A margin call in cryptocurrency, options, and derivatives markets represents a broker’s demand for additional funds to bring an account back to the minimum required margin.
Realized Losses
Loss ⎊ Realized losses represent the actual, confirmed financial deficit incurred when a derivatives position is closed out at a price less favorable than its opening price.
Maintenance Margin
Collateral ⎊ Within cryptocurrency derivatives and options trading, the maintenance margin represents the minimum equity a trader must maintain in their account to cover potential losses.