Investing · General financial education

Margin and collateral calls

A margin or collateral call arises when a position's value falls below a contractual threshold. You are trading with borrowed money or pledged collateral. The broker then asks for more cash or collateral, or closes positions.

In more detail

Leverage amplifies gains and losses. If prices fall, collateral may no longer cover the requirement. Deadlines, thresholds and forced sales are in the contract; they are not universal Finmon figures. Without a top-up the position may be closed, including at a loss.

Background

Finmon explains the mechanic only. It recommends no leverage, no broker and no trading. Secured lending outside securities trading can also involve collateral top-ups. Read the contract and risk disclosure before using such structures. Education is not a buy signal.

An example

You hold shares on margin. The price falls. The broker says collateral is no longer enough. You must add cash or positions are sold.

A common misconception

With collateral posted, nothing serious can happen.

If value falls below the threshold, a top-up or forced sale can follow. That is in the contract.

Source: Investor.gov · Margin call. Last reviewed: 2026-11-01. Editorially reviewed on 2026-11-01. Next review 2027-11-01. Version 0.2.0. Finmon explains. It does not advise. Not investment, tax or legal advice.