Margin Call
A demand from a broker for additional funds when losses reduce collateral below the required level.
Formula
Shortfall = Required Margin - Available Collateral, payable immediately
Unit
₹
In depth
A margin call is a deadline, not a negotiation: unmet, the broker liquidates positions at market prices to restore the requirement, and those prices are by definition unfavourable. Calls cluster in falling markets, so many participants are forced to sell simultaneously, which deepens the fall and generates further calls — the mechanism behind cascading declines. Margin requirements themselves rise when volatility rises, so the requirement can increase on a position that has not changed. The only reliable protection is to use less leverage than the maximum permitted, so that ordinary volatility never triggers one.
Worked example
₹1,00,000 of collateral supporting a ₹5,00,000 position falls to ₹60,000 after an 8% adverse move. If the requirement is ₹1,00,000, a ₹40,000 call must be met the same day or the position is closed.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Margin Call” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.