Why is it called Margin Call?
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Philo89 — 11 years ago(April 23, 2014 10:29 PM)
As others pointed out, from a financial perspective there wasn't a direct margin call. But consider the meaning of the words - the company was in the margins of their ledgers, about to run off the end of the page and they made the call to dump it all.
It's a bit of a stretch, but I think the visual works. -
JayBee-66 — 10 years ago(July 26, 2015 06:59 AM)
If you are buying and selling derivatives then you are buying a highly leveraged instrument.
Even for a small investment in a futures or options contract a big swing against you can result in a large loss. When you buy stocks the maximum you can lose is the initial investment. If you buy a derivative then if the position goes against you potentially you can lose more than your initial investment.
Brokers will ask for margin to cover any short term losses. If the loss goes further against you then you will get a margin call whereby you have to provide more cash to keep the position open or be automatically closed out.
Hope that helps you. -
colinjbeesley — 10 years ago(February 13, 2016 11:31 PM)
The term was also used in Trading Places. Right at the end when the Duke brothers have been ruined by their disastrous trading in frozen orange juice, representatives of the NYSE ask them to settle up their debts and they are informed "Margin call gentlemen". So in a simple sense its the point of financial reckoning. Hope this helps even though its a long time since you posed your question