What Role Do ‘Margin Calls’ Play in Derivatives Trading?
Margin calls are demands from a broker to a trader to deposit additional funds into their margin account to bring the account's equity back up to the minimum required level. They occur when the value of the assets in the account falls due to adverse price movements, reducing the collateral below the maintenance margin.
Failure to meet a margin call can lead to the forced liquidation of the trader's position.
