Margin Call

Quick Reference

Richiesta del broker di depositare cash addizionale quando losses erodono il margin al di sotto del livello minimo richiesto.

Definizione

Margin Call = Broker richiede fondi extra per mantenere posizioni aperte.

Trigger: Account equity scende sotto maintenance margin requirement.

Come Funziona

Setup Iniziale

Capital: $10,000
Position: $50,000 (leverage 5×)
Initial margin requirement: 20% = $10,000 ✓

Dopo Perdita

Position value: $45,000 (-10% loss)
Loss: $5,000
Equity: $10,000 - $5,000 = $5,000
Current margin: $5,000 / $45,000 = 11%
Required margin: 20%

Margin call! Devi depositare $4,000 per tornare al 20%.

Mark to Market

Daily valuation: 1. Broker calcola market value di tutto 2. Sottrae loans/obligations 3. Calcola equity 4. Verifica vs margin requirements 5. Se insufficiente → margin call

Questo succede ogni giorno (o anche intraday).

Risposta a Margin Call

Opzione A: Meet the Call

Deposita cash richiesto: - Entro deadline (spesso 24-48 ore) - Account torna compliant - Posizioni mantenu

te

Opzione B: Reduce Position

Chiudi parte delle posizioni: - Riduce exposure - Aumenta margin % - Problemi: Selling at bad time, locking losses

Opzione C: Do Nothing

Auto-liquidation: - Broker chiude forzatamente posizioni - A prezzi pessimi (urgenza) - Possibili additional losses - Worst option!

Maintenance Margin

Due tipi margin:

Initial Margin: - Richiesto per aprire posizione - Tipicamente 20-50% per retail

Maintenance Margin: - Livello minimo per mantenere posizione - Tipicamente 10-30% (< initial) - Margin call quando scendi sotto questo

Esempio Dettagliato

Day 0 (Open Position)

Cash: $20,000
Buy S&P 500 futures: 5 contracts @ 4500
Exposure: 5 × $5 × 4500 = $112,500
Leverage: 5.6×
Initial margin required: $1,300 × 5 = $6,500
Equity: $20,000
Margin %: $20,000 / $112,500 = 18% ✓

Day 1 (Small Loss)

S&P drops to 4400 (-2.2%)
Position value: $110,000
Loss: $2,500
Equity: $17,500
Margin %: $17,500 / $110,000 = 16%

Still above maintenance (13%) → No call yet

Day 2 (Bigger Loss)

S&P drops to 4300 (-4.4% total)
Position value: $107,500
Total loss: $5,000
Equity: $15,000
Margin %: $15,000 / $107,500 = 14%

Still OK (barely)

Day 3 (Margin Call!)

S&P drops to 4200 (-6.7% total)
Position value: $105,000
Total loss: $7,500
Equity: $12,500
Margin %: $12,500 / $105,000 = 12%

Below 13% maintenance!

Margin call: Deposita $3,500 o riduci posizione.

Preventing Margin Calls

1. Appropriate Leverage

Never use max allowed leverage: - Broker allows 30×? Use 5-10× max - Leaves buffer per price moves

2. Volatility-Based Sizing

Account for volatility:

Position = Capital × Target / (Price × σ%)

Automatically smaller positions quando volatility alta.

3. Cash Buffer

Keep extra cash: - Don't invest 100% of capital - 20-30% cash buffer cushion

4. Daily Monitoring

Check equity daily: - Know margin % - Anticipate potential calls - Preemptive action

Intraday Margin Calls

High volatility può trigger intraday:

Esempio March 2020 COVID: - S&P moved ±5% intraday - Brokers made multiple calls per day - Many traders forced out at worst prices

Negative Balance

Worst case scenario:

Rapid price movement: - Loss > equity - Account goes negative - You owe broker money!

EU Regulation (2018): Retail protected from negative balance. US: No protection - you liable for debt.

Different Products

Futures

  • Exchange-set margin requirements
  • Maintenance margin strict
  • Variation margin daily

CFD/Spread Bets

  • Broker-set requirements
  • Can change suddenly
  • Often more lenient than futures

Margin Stocks

  • Regulation T (US): Min 25% maintenance
  • Can be higher per broker policy

Flash Crashes

Extreme danger:

2010 Flash Crash, 2015 ETF crash: - Prices gapped down instantly - Margin calls before recovery - Auto-liquidation at bottom - Losses locked in

Lesson: Wide stops, conservative leverage.

Margin Call Psychology

Typical reactions:

Denial: "It'll bounce back, I'll wait" Panic: Liquidate everything immediately Freeze: Do nothing, hope for best

Better: Pre-planned response - "At -20% I deposit more" - "At -30% I cut 50% position" - "At -40% I exit completely"

Avoiding Common Mistakes

Don't: - Ignore margin calls (auto-liquidation) - Deposit "hoping" for bounce (throwing good $ after bad) - Hold through call without conviction - Use max leverage (no buffer) - Panic sell at worst moment

Do: - Size positions conservatively - Keep cash buffer - Monitor equity daily - Have predetermined exit plan - Reduce leverage if uncertain

Errori Comuni

  • Using max leverage: No room for adverse moves
  • Not monitoring: Surprised by margin call
  • No cash buffer: Fully invested, can't meet call
  • Ignoring calls: Leads to forced liquidation
  • Adding to losers: "Averaging down" into margin call
  • Assuming it won't happen to you: It can happen to anyone

Concetti Correlati

  • [[Leverage]] - higher leverage = easier margin calls
  • [[Mark to Market]] - mechanism behind calls
  • [[Volatility Targeting]] - prevents excessive leverage
  • [[Drawdown]] - large DD triggers margin calls