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A margin call means your broker is asking you to repay the money it lent you to buy stocks - and if you don't, it could mean big losses for your portfolio

Posted On: Feb 27, 2021   |   Posted By: Business Insider

A margin call means your broker is asking you to repay the money it lent you to buy stocks - and if you don't, it could mean big losses for your portfolio

Summary List Placement Sometimes, stock market investors are able to borrow money from their broker to buy stocks or other securities. This tactic is called buying on margin, or margin trading .
Margin trading increases your buying power and amplifies profits.
But the possibility of encountering a margin call is the big "catch" of margin trading. Basically, it's a request by your broker to pay back some of the money you borrowed - pronto. If you don't, the broker can seize some of your portfolio's assets and sell them.
Before you begin using margin, you need to understand what margin calls are and why they can be so dangerous to your portfolio - and your finances.
How does margin trading work?
But before we get into margin calls, a brief explanation of margin trading itself.
When you buy an investment - stocks, bonds, exchange-traded funds - on margin, you pay some money in cash and borrow the rest, usually up to half of the purchase price. The investment itself is used as collateral for the money...

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