Knowledge
Understand core FX, risk, and execution concepts used across Okoora’s infrastructure.
American Trigger, Bid, At The Money (ATM) Option
A margin call is a demand from a broker or clearinghouse requiring an investor or trader to deposit additional funds or securities into their margin account when the account’s equity falls below the required maintenance level. It is triggered by adverse price movements and ensures the investor can continue to meet potential losses on leveraged positions.
When trading on margin, investors borrow funds to increase their exposure. Brokers require an initial margin when opening a position and monitor the account through daily mark-to-market practices. If losses reduce the account’s equity below the maintenance margin, a margin call is issued. The investor must then deposit additional capital or risk forced liquidation of positions.
Suppose an investor buys $20,000 in securities using $10,000 of their own funds and $10,000 borrowed from the broker. If the value drops to $15,000, their equity becomes $5,000. If the maintenance margin requirement is 50%, the account should have $7,500 in equity (50% of $15,000). Since it only has $5,000, the investor receives a $2,500 margin call.
Margin calls are most common in volatile markets, where price swings can quickly erode account equity. They are especially critical in:
Failure to meet a margin call may lead to forced liquidation, where the broker sells off assets without consent to cover the shortfall. This can compound losses if market conditions are unfavorable at the time of liquidation.
