Margin Call Calculator

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Reviewed by David Chen, CFA.

This calculator has been verified against standard financial modeling practices used in brokerage and investment analysis.

Use this Margin Call Calculator to determine the minimum stock price at which your broker will issue a margin call, forcing you to deposit additional funds or liquidate assets.

Margin Call Price Calculator

Enter as a percentage (e.g., 30 for 30%)

Margin Call Price Formula

The Margin Call Price (MCP) is the lowest price per share your margined stock can reach before your broker issues a call.

$$\text{MCP} = \frac{\text{Debit Balance}}{\text{Shares Purchased} \times (1 – \text{Maintenance Margin})}$$

Where:

  • Debit Balance ($\text{L}$) = The amount of money you borrowed.
  • Shares Purchased ($\text{N}$) = The total number of shares bought on margin.
  • Maintenance Margin ($\text{MM}$) = The minimum equity percentage required by the broker (as a decimal).

Formula Sources: Investopedia – Margin Call, Fidelity – Margin Call Formula

Variables Explained

  • Shares Purchased: The total number of units of stock you hold in your margin account.
  • Debit Balance: This is the loan amount—the cash borrowed from your broker to fund the purchase.
  • Maintenance Margin (%): A regulation or house rule (typically 25% or 30%) that specifies the minimum amount of equity required in your margin account. If your equity falls below this level, a margin call is issued.
  • Initial Purchase Price: The original price per share you paid for the stock. Used to calculate initial equity and for context.

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What is a Margin Call?

A margin call is a demand from a brokerage firm to an investor to deposit additional money or securities into their margin account to bring it up to the minimum required maintenance margin. It signifies that the investor’s equity has fallen too low relative to the total value of the securities held.

The margin call price is the critical threshold. If the stock price falls to this level, the equity in the account is exactly equal to the required maintenance margin. Falling below this price triggers the call. Brokers use these calls to protect themselves from potentially unrecoverable losses, as the account’s value serves as collateral for the loan (the debit balance).

How to Calculate Margin Call Price (Example)

  1. Determine the Inputs: Assume you purchased 500 Shares (N) with a $25,000 Debit Balance (L), and your broker has a 30% Maintenance Margin (MM).
  2. Convert Margin to Decimal: Convert the Maintenance Margin from a percentage to a decimal: $30\% = 0.30$.
  3. Calculate the Denominator (Equity Portion): Calculate the portion of the current value that must cover the loan by subtracting the margin from 1: $1 – 0.30 = 0.70$.
  4. Apply the Formula: Divide the Debit Balance by the product of the Shares and the Equity Portion: $$\text{MCP} = \frac{\$25,000}{500 \times (1 – 0.30)}$$
  5. Solve: $$\text{MCP} = \frac{\$25,000}{500 \times 0.70} = \frac{\$25,000}{350} = \$71.43$$ The margin call price is $71.43. If the stock drops to this price, a margin call will be issued.

Frequently Asked Questions (FAQ)

Q: What happens if I receive a margin call?

A: You must quickly deposit enough cash or eligible securities to bring your equity back above the minimum requirement. If you fail to do so, the broker has the right to sell (liquidate) securities in your account without consulting you, to cover the shortfall.

Q: Is the Maintenance Margin always 25%?

A: No. While FINRA (Rule 4210) sets the minimum maintenance margin at 25% of the total market value, many brokerage firms require a higher “house” margin, often 30% or more, depending on the volatility of the securities held.

Q: Does Initial Margin affect the Margin Call Price?

A: Not directly. The Margin Call Price is calculated purely based on the Maintenance Margin and the amount of the outstanding loan (Debit Balance). However, a higher Initial Margin means a lower Debit Balance initially, which lowers the Margin Call Price, making a call less likely.

Q: Why is the Debit Balance so important in this calculation?

A: The Debit Balance is the numerator (loan amount). The maintenance margin is applied to the *current market value* of the stock. When the stock price drops, the current market value decreases, making the fixed loan amount a larger percentage of the total value. The MCP calculation finds the exact price where the market value only just covers the loan while respecting the maintenance margin floor.

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