When you trade on margin, you have to put up only a certain percentage of your own money. The remainder comes from your broker in the form of a loan. Trading on margin lets you make more trades than if you paid for each trade from your own funds. If the market moves against your trade, your account may fall below the margin minimum.
This is known as the initial margin. If your broker has a higher initial margin requirement, you must deposit the higher amount to trade on margin. You can keep cash, securities or a combination of both in your account to fulfill the margin requirement.
You must act immediately to satisfy a Fed call in one of three ways. Selling stock already in your margin account could result in a liquidation violation.
If you get too many Fed calls or incur a liquidation violation, your margin account may be restricted or closed. This is known as the maintenance margin. You have two business days from when you first receive the call to deposit additional cash or securities, or to sell securities in your account.
If you sell securities already in your account, you won't incur a liquidation violation. She received a bachelor's degree in business administration from the University of South Florida. At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors.
This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. These returns cover a period from and were examined and attested by Baker Tilly, an independent accounting firm. Visit performance for information about the performance numbers displayed above.
Skip to main content. References 4 Electronic Code of Federal Regulations: Fed Call Securities and Exchange Commission: About the Author Based in St. Zacks Research is Reported On:More...