A margin call always equals an account blowup, right?

Discussion in 'Trading' started by crgarcia, Aug 29, 2008.

  1. I read stories, here at ET about people who got margin calls, yet they continue trading.

    How they do it?
    (Other than refunding their account)
  2. Margin calls don't "freeze" or "blow up" the account. They simply mean that your open positions are too large compared to account size. So the "people" you are referring simply reduce their positions and continue trading. Not that it's a good thing, but it's not the end of the world, either.
  3. If you violate margin by $1 you get a margin call. You close the position, take the loss and since you now have less money in the account just trade smaller size.

    If you use a broker like IB you don't get a margin call as they just close out enough contracts to bring you back into margin compliance. It is then up to you to manage the remaining position.

    Margin call does not equal blowup.
  4. 2ticks


    Margin call does not equal account blowup. Margin call means the equity value of all positions currently held, combined, is not sufficient to continue holding the combined positions as is.
  5. It also means that you let a small loss turn into a big loss and that you're probably undercapitalized.