What Is the Purpose of a “Margin Call” in Leveraged Financial Derivatives Trading?
A margin call is a demand from a broker or exchange for an investor to deposit additional funds or securities into their margin account. It occurs when the value of the collateral in the account falls below the required maintenance margin level, typically due to adverse price movements.
The purpose is to cover potential losses and bring the account equity back up to the required level, preventing the broker from forcibly liquidating the position.
