What Is a Margin Call in the Context of Futures Contracts?
A margin call is a demand from a broker or exchange for a trader to deposit additional funds into their margin account. It occurs when the value of the account falls below a specified level, known as the maintenance margin, due to adverse price movements in their futures position.
The trader must bring the account balance back up to the initial margin level. A margin call is a crucial risk-management tool that helps ensure traders can cover their losses and prevents defaults from cascading through the financial system.
