Margin call

A demand for further funds when the equity in a margin account falls below the maintenance margin, on a leveraged share purchase or a futures position alike. If it is not met in time, the position is closed out.

Where you will meet it

Margin call appears in 4 learning outcomes on the CFA syllabus. A few of them:

• Explain what margin and a clearing house do
  CFA Level I · Derivatives

  “If the account falls below the maintenance level, a margin call restores it to the initial level under the usual convention — not to the maintenance level, which is a detail that trips up many candidates.”

• Contrast the vehicles through which an investor can gain index-based equity exposure
  CFA Level III · Portfolio Management Pathway

  “Derivatives-based approaches use index futures, total return swaps or options: they are capital-efficient and quick to put in place, but futures must be rolled, carry basis risk and margin calls, and swaps add counterparty risk.”

• Explain what can go wrong when a portfolio is managed against a set of liabilities
  CFA Level III · Portfolio Management Pathway

  “There is also counterparty and collateral risk on swaps, liquidity risk from margin calls after sharp rate moves, and uncertainty in the timing or amount of liabilities.”

• Explain why investors trade and how the reason shapes the trading approach
  CFA Level III · Portfolio Management Pathway

  “Corporate actions and margin calls create forced trades, and routine rebalancing trades can often be worked patiently.”

Practise it

• Today's practice question One question, with every wrong option explained.
• Free Level I diagnostic test Twelve questions that show which topics to start with.
• Free finance calculators Check your arithmetic on the exam's core formulas.

All terms beginning with M · Glossary