A margin call is your broker’s demand that you add cash or securities to your account after your equity falls below the maintenance level required on a margin loan. It comes with a short deadline, and if you don’t meet it, the broker can sell your holdings without asking you first.
The call itself is a symptom. The cause is that the securities backing your margin loan have lost enough value that the broker’s collateral cushion has thinned below what regulation, or the broker’s own rules, allow.
What Triggers a Margin Call
Your account equity is the market value of your securities minus what you owe the broker. A margin call fires the moment that equity, expressed as a percentage of the position’s current value, drops below the maintenance requirement.
FINRA Rule 4210 sets the regulatory floor at 25% of the current market value of long equity positions.1FINRA.org. 4210. Margin Requirements Most brokerages set a stricter “house” requirement on top of that, typically between 30% and 40%. The house number is usually what trips first.
The dollar amount of the call is simple arithmetic. Multiply the current market value by the maintenance percentage, then subtract your actual equity. Say you bought $20,000 in stock with a $10,000 margin loan, and the position drops to $13,000. At a 25% requirement, you need $3,250 in equity. Your actual equity is $3,000 (the $13,000 value minus the $10,000 loan). The call is for $250.
Two less visible triggers matter. Accrued margin interest quietly increases your loan balance every month, which shrinks equity even when prices are flat. And brokers can raise the house requirement at any time without warning, which occasionally produces calls in a still market.2eCFR. 12 CFR Part 220 – Credit by Brokers and Dealers (Regulation T)
How to Meet the Call
You have three ways to bring equity back above the maintenance line. Understand the trade-offs before you’re rushing to decide.
Deposit Cash
The cleanest response. Every dollar deposited raises your equity by a dollar and reduces the loan balance. A $1,000 call takes exactly $1,000 in cash.
Transfer Marginable Securities
You can move fully paid securities in from another account, but only a portion of their value counts toward the requirement. If a security carries a 50% margin requirement, you need $2,000 of market value to satisfy a $1,000 call. The formula: call amount divided by (1 minus the security’s margin requirement).
Sell Positions in the Account
Selling securities you already hold is often the fastest option when outside cash isn’t sitting ready. The sale reduces both the market value of the account and the loan balance, which lifts your equity percentage. The costs are real: you lock in losses on positions you may not have wanted to close, and any gains are taxable.
How Long You Have
The deadline depends on which kind of call it is.
Regulation T initial margin deficiencies use a payment period defined as the standard settlement cycle plus two business days. With the current one-business-day settlement cycle, that works out to three business days.3FINRA. 2025 Extensions of Time Filing Schedule
Maintenance margin calls are different. Your broker sets the deadline and can demand immediate payment. In normal conditions, most brokers allow two to five business days. In fast-moving markets, that flexibility disappears.
If truly exceptional circumstances prevent you from meeting the deadline, the broker can apply to its examining authority for a limited extension. The request must be filed before the original deadline expires, and it will only be granted if the broker is acting in good faith and the circumstances warrant it.2eCFR. 12 CFR Part 220 – Credit by Brokers and Dealers (Regulation T) You can’t file it yourself, and it isn’t something to plan around.
What Happens If You Don’t Meet the Call
If the call isn’t satisfied in full within the payment period, Regulation T requires the broker to liquidate enough securities to eliminate the deficiency.2eCFR. 12 CFR Part 220 – Credit by Brokers and Dealers (Regulation T) Two features of that process surprise most people.
First, the broker doesn’t have to call you before selling. Most margin agreements explicitly waive any obligation to give notice. Second, the broker picks which positions to sell. It picks based on protecting its own loan, not on your tax situation or which holdings you’d rather keep. You’re liable for any losses the forced sale produces, even if the timing is terrible.
Expect restrictions on your account afterward. Brokers often impose a permanently higher house maintenance requirement, require cash-only trading for a period, or limit your ability to open new margin positions.
Tax Fallout from a Forced Sale
A forced liquidation is a taxable event like any other sale. The IRS treats it as a disposition of property, and you recognize a capital gain or loss based on the difference between the sale proceeds and your adjusted basis.4Internal Revenue Service. Publication 544, Sales and Other Dispositions of Assets Held a year or less, the gain is short-term and taxed as ordinary income. Losses follow the same holding-period rules.
The Wash Sale Problem
This is where a forced liquidation can genuinely hurt. If you sell securities at a loss and acquire substantially identical securities within 30 days before or after the sale, the loss is disallowed.5Office of the Law Revision Counsel. 26 U.S. Code 1091 – Loss From Wash Sales of Stock or Securities The statute applies to “any sale or other disposition.” It doesn’t carve out an exception for involuntary sales.
The scenario that catches investors: the broker force-sells 200 shares at a loss, but you still hold 500 shares of the same stock in the account, or in an IRA, or in your spouse’s account. The wash sale rule applies across all of them. The loss is disallowed and added to the basis of the remaining shares, so you can’t use it to offset gains on the current year’s return. You still owe tax on any gains the forced sale produced elsewhere in the account.
Short Positions and Day Traders
Two situations follow different rules worth flagging.
A short position reverses the direction of the risk. You borrow shares, sell them, and hope to buy them back cheaper. A margin call is triggered when the price rises, because the cost to close the position goes up and your equity shrinks. The maintenance requirement for short equity positions is typically 30%, higher than the 25% minimum on long positions. If the stock pays a dividend while you’re short, you owe that dividend to the share lender6U.S. Securities & Exchange Commission. Key Points About Regulation SHO, and it comes out of your equity, which can push you toward a call even without price movement. Because the theoretical loss on a short is unlimited, brokers tend to enforce calls on short positions more aggressively, sometimes with immediate deposit demands or fast liquidation.
Pattern day traders face a separate minimum. If you execute four or more day trades within five business days and that activity is more than 6% of your total trades, the broker classifies you as a pattern day trader. That classification requires you to maintain at least $25,000 in equity in your margin account at all times. Drop below and you’ll receive a margin call that restricts day trading until the balance is restored.