What Is a “Margin Call” in a Leveraged Derivatives Position?
A margin call is a demand from a broker or exchange for a trader to deposit additional funds or assets into their margin account. This occurs when the equity in the account falls below the maintenance margin level due to adverse price movements.
If the trader fails to meet the margin call, the broker may liquidate the position to cover the losses.
Glossar
Leveraged Derivatives
Mechanics ⎊ Leveraged derivatives in cryptocurrency and traditional finance amplify potential returns, and correspondingly, potential losses, through the use of borrowed capital or contractual obligations exceeding the initial investment.
Deposit Additional Funds
Requirement ⎊ Deposit additional funds refers to the action a trader must take to increase the collateral in their margin account when a margin call is issued.
Maintenance Margin Level
Collateral ⎊ The maintenance margin level, within cryptocurrency derivatives and options trading, represents the minimum equity a trader must maintain in their account relative to their margin requirements.
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.