Margin Calls is when the % of equity verses the debt falls below the broker’s min. standards, a margin call is issued to either come up with the money to bring the equity back to 50% or the shares of the portfolio will be sold to bring it up to 50%.
There is usually only a few days to come up with the money. (if you have 1000 dollars and buy 20 shares of CMGI at $100 a share. Thus borrowing $1000. If your broker min. requirement is 30%, then you will get a margin call if CMGI drops to 71 1/4. After your margin call you are either expected to pay $575 or 8 shares of your CMGI will be sold bringing your total value of your portfolio to 425. Using margin can double your profits or double your losses. Be careful and is a good habit to either not use it or borrow 20% or less of your stock’s value)
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