Lesson 6 of 8
Margin Calls
When your broker forces you to sell
You buy $20k of stock with $10k cash + $10k margin
Stock drops and your equity falls below 25% of the position value
Broker issues a margin call: deposit more cash or they sell your shares
If you can't deposit, they liquidate your position at the worst possible time
Margin call trigger
~25%
equity ratio
Time to respond
2-5 days
sometimes hours
Archegos collapse
$36B
margin-fueled blowup (2021)
In 2021, Archegos Capital used massive margin to build concentrated positions. When stocks dropped, margin calls cascaded and the fund lost $36 billion in days. Banks lost billions too.
warning
Margin calls happen at the worst time: when your stocks are crashing. You're forced to sell at the bottom. This is how people go from a loss to a total wipeout.
Check yourself
What happens if you can't meet a margin call?