A margin call is a broker or exchange alert that your account equity has fallen below the required maintenance level. It means your collateral no longer covers the risk of your open positions, so you must add funds or reduce exposure.
You meet margin calls in margin stock accounts, short selling, options writing, futures, spread bets, CFDs, FX and crypto derivatives. Exact rules and thresholds vary by provider and product, and they can change, but the core idea is the same: restore enough equity to support the risk on the books.
What triggers a margin call
Most margin calls start with market moves against you. Losses reduce the equity in your account while the required margin often stays the same or even rises in volatile periods. When equity drops below the maintenance requirement, the alarm goes off.
Common triggers include:
- Price declines on long positions or rallies on shorts.
- Volatility spikes that lift margin requirements on some products.
- Concentration in one asset that pushes your risk metrics higher.
- Financing costs and fees that chip away at equity over time.
Using leverage makes the system more sensitive. With borrowed exposure, a relatively small price move can shrink equity quickly, especially if you have several correlated positions moving the same way.
Maintenance margin, equity and how the numbers work
Two figures matter day to day: your account equity and the maintenance margin. Equity is your cash plus or minus the floating profit and loss from open positions, after financing and fees. Maintenance margin is the minimum equity the broker or exchange wants you to hold to keep your positions open.
Think of a simple example. You post £10,000 as collateral and open positions that require £8,000 of maintenance margin. If those positions fall in value by £3,000, your equity becomes £7,000. Equity is now below the £8,000 maintenance level, so you are on call until you bring equity back above £8,000. That could mean depositing at least £1,000 or cutting enough exposure to lower the required margin.
The precise calculation depends on the product:
- Listed equity margin often uses percentage requirements that differ for long and short positions, and may be higher for volatile stocks.
- On a futures contract, exchanges set initial and maintenance margin per contract, and your account is marked to market daily. Fall below maintenance and you must top up to at least initial margin.
- CFD, FX and many crypto venues show a margin level ratio, often equity divided by used margin. If that ratio slips under a platform threshold, you may get a call or face automatic reductions.
Some platforms offer cross margin, where your entire wallet backs all positions, and isolated margin, where each position has its own ring‑fenced collateral. Cross margin can cushion one position with gains from another, but it also puts more of your account at risk if several trades move against you at once.
What happens after the call
A margin call is a request with a deadline. The window might be hours or shorter on fast markets, sometimes until a stated cut‑off. If you do not meet it in time, the broker can reduce or close positions to protect the account.
Typical steps after a call:
- You receive a notice stating the shortfall and deadline.
- You can deposit funds or transfer collateral from another account.
- You can close or shrink positions to free up margin. Some brokers let you hedge to cut risk metrics, although the effect depends on their models.
- If you do nothing, the broker may liquidate part or all of your positions, often using market orders. That can introduce slippage, especially in thin or gapping markets.
Forced liquidation can happen very quickly in products that update margin in real time. In extreme volatility, many providers widen risk controls or raise margin, which can intensify the pressure on accounts already near the threshold.
Managing positions to avoid margin calls
You cannot remove market risk, but you can set up your account to be more resilient to swings that would otherwise trigger calls.
- Use conservative position sizing. Leave a buffer rather than deploying all available buying power.
- Consider stops and alerts. A stop loss will not fill at your chosen price in all conditions, but it can help cap open losses.
- Watch correlations. Several positions tied to the same theme can behave like one larger trade.
- Account for overnight and weekend gaps. Prices can jump past stops when markets reopen, which can eat into equity before you can act.
- Understand the venue’s margin model. Learn how hedges, options and offsets are treated. In some systems, a well structured hedge reduces the required margin. In others it does not.
- Plan liquidity. Keep cash or eligible collateral ready to move if volatility picks up.
Options can also be part of risk control. For example, buying a protective put beneath a long stock position limits the downside and can reduce margin needs in some frameworks. If you write options, especially uncovered calls on volatile names, be aware that margin can rise quickly when the underlying moves and when time to expiry shrinks.
How margin calls differ across markets and products
While the principle is universal, the mechanics vary.
- Equities and short selling: Long stock bought on margin faces equity‑based maintenance tests. Short stock adds borrow costs and the risk of buy‑ins if supply dries up, both of which affect equity.
- Futures: Margin is standardised by the clearing house and updated via daily mark‑to‑market. Calls require a prompt top‑up to initial margin. Sudden volatility can lead to intraday calls.
- CFD and FX: Margin levels are often shown as a percentage. If the percentage drops through tiers, the platform may first restrict new trades, then close losing positions automatically until the level recovers.
- Options: Short options carry margin that reflects potential moves in the underlying. Assignment or exercise can create new positions that change your margin picture at once.
- Crypto derivatives: High notional leverage and large price swings mean thin buffers can disappear quickly. Some venues use auto‑deleveraging or insurance funds to handle liquidations, which changes how and when positions are closed.
Providers can also change margin requirements for specific assets during volatile periods or around known events. That can push accounts from comfortable to at risk without any price move, simply because the maintenance level rose.
Worked example: from healthy to on call
Say you hold £25,000 in cash collateral and run two leveraged index positions that together require £15,000 of maintenance margin. Your account equity is £25,000 and your margin buffer is £10,000.
If markets fall and your unrealised loss grows to £12,000, equity becomes £13,000. You are now £2,000 below the £15,000 maintenance level. The broker issues a call. You have options:
- Deposit £2,000 or more to restore equity above maintenance.
- Close part of a position so the maintenance requirement falls below £13,000.
- Add a hedge that your provider recognises for margin relief, such as a smaller short in a correlated index future, subject to platform rules.
If you do not act and losses widen, the broker can start to reduce positions. If the market is moving quickly, fills may be below the prices you saw on screen, which can temporarily push equity even lower during the process.
Why margin calls matter beyond the account level
Margin calls can amplify market moves. When many traders must sell into weakness or buy into strength to meet calls, prices can overshoot. This is one reason why leverage and leveraged products often see sharp swings during stress, and why risk buffers matter even in quiet periods.
The bottom line is straightforward: a margin call is a prompt to restore your safety cushion. Know how your venue measures equity and maintenance, keep a buffer, and plan how you would respond before the alert arrives.