Glossary · Funds and derivatives
Margin call
A margin call is a broker’s demand for more cash when an investment bought with borrowed money falls too far. If you cannot pay, the broker sells it.
Also called: maintenance margin, margin account, buying on margin, forced liquidation
Starting in 1929, 1974, 2002, 2008. Each would have brought a margin call to anyone 2× leveraged at the top.
In plain words
When you borrow from a broker to buy shares, the shares are the lender’s safety net. If they fall too far, that net gets thin. The broker then sends a margin call: put in more money or more shares, now, or we will sell some of yours to repay the loan.
The rule is a minimum share of the account that must be your own money, the maintenance margin. In the US the minimum (as of 2026) is 25% of the value of the shares, and many brokers ask for 30–40%. Futures accounts have their own margins, checked every day.
Margin calls arrive at the worst time: after prices have fallen. Selling then locks in the loss, and if many investors are forced to sell at once, prices fall further, bringing more margin calls.
Example
When does the call come?
You buy $20,000 of shares: $10,000 of your own and $10,000 borrowed. The broker’s maintenance margin is 25%.
- Your equity = value of the shares − loan. At the start: $20,000 − $10,000 = $10,000, 50% of the account.
- The shares fall 20% to $16,000: equity $6,000, 37.5%. No call yet.
- They fall to $13,333: equity $3,333, exactly 25%. Any lower, and you get a margin call. (In general: call when value < loan ÷ (1 − 25%) = $10,000 ÷ 0.75.)
- At $12,000 your equity is $2,000. To get back to 25% you must add $1,000, or the broker sells about $4,000 of shares to repay part of the loan.
A fall of one third, which stock markets have seen several times, takes a 2× investor to a margin call.
One level deeper
Margin calls helped turn the crash of 1929 into a collapse. Many buyers then had borrowed most of the price of their shares, so the first falls forced sales that pushed prices lower and forced more sales. Since the 1930s the Federal Reserve has set how much can be borrowed to buy shares (Regulation T); the limit has been half the price since 1974.
Big investors face margin calls too. In March 2021 the family office Archegos Capital, which had huge bets on a few stocks through swaps with banks, could not meet its margin calls. The banks sold its positions in large blocks within days and lost about $10 billion between them.
A broker does not have to wait for you: in a fast market it can sell your shares without notice, choose which ones to sell, and charge you if the sale leaves a debt. On futures, the clearing house settles gains and losses daily, so margin calls there come every day prices move against you.
How far the S&P 500 fell below its high, since 1928
Each point shows how far the index stood below its highest level so far. Below the dashed line, an investor who had bought at the top with 2× leverage and a 25% maintenance margin would have had a margin call. That happened in 4 separate falls, starting in 1929, 1974, 2002, 2008. The deepest fall reached −85% in Jun 1932. The index is now at a record high (Oct 2026).
The numbers behind the chart
| Date | S&P 500 below its high |
|---|---|
| Jan 1928 | 0% |
| Dec 1930 | −50% |
| Dec 1940 | −66% |
| Dec 1950 | −37% |
| Dec 1960 | −5% |
| Dec 1970 | −15% |
| Dec 1980 | −2% |
| Dec 1990 | −9% |
| Dec 2000 | −10% |
| Dec 2010 | −19% |
| Dec 2020 | 0% |
| Dec 2022 | −16% |
| Dec 2023 | 0% |
| Dec 2024 | 0% |
| Dec 2025 | 0% |
| Oct 2026 | 0% |
Why it matters
Margin calls force selling at low prices, turning paper losses into real ones.
They spread crises: many forced sellers at once push prices down and trigger more calls, as in 1929, 1987 and 2008.
They show why leverage is dangerous even for someone who is right in the long run: the market can fall far enough to force you out first.
A common mistake
Myth: The broker will always call me and give me time before selling.
In fact: Account agreements usually let the broker sell without warning, at the price it can get, when your margin is too low. In a fast-falling market, that can happen within hours.
Questions people ask
What happens if you ignore a margin call?
The broker sells securities in your account, as many as it needs to restore the minimum, and may charge fees. If the sales do not cover the loan, you still owe the difference.
How do you calculate when a margin call happens?
For shares bought with a loan, the call comes when the account value falls below the loan ÷ (1 − maintenance margin). With a $10,000 loan and a 25% minimum, that is $13,333.
What is the difference between initial margin and maintenance margin?
Initial margin is how much of the price you must pay with your own money when you buy (50% under US rules). Maintenance margin is the minimum share of your own money you must keep afterwards (at least 25%).
Read more on BigCapital
About the numbers
- The numbers on this page are recalculated from the data every night; the sources are listed at the end of the page.
- S&P Composite price and total return since 1871, and US consumer prices: Robert J. Shiller, Online Data (shillerdata.com); total return with dividends reinvested monthly, calculated by BigCapital.
- Monthly averages smooth out the deepest days: measured by daily closes, the falls were somewhat deeper, so margin calls came a little more often than this chart shows.
- This page explains a term. It is not investment advice.