How to use the margin call price calculator
- Choose whether the position was bought (long) or sold short.
- Enter the entry price per share and, optionally, the number of shares.
- Enter the share of the position that is your own cash and the maintenance level. Both are examples to replace with the figures from your account.
- Read the margin call price, how far it is from the entry, and the amount borrowed and the gain or loss at the call when you entered shares.
Formula
long: loan per share = price x (1 - own cash / 100)
long: call price = loan per share / (1 - maintenance / 100)
short: call price = price x (1 + own cash / 100) / (1 + maintenance / 100)
A long position is called when equity divided by market value falls to the maintenance level. A short position is called when equity, which is the sale proceeds plus your cash less the cost to buy back, falls to the same level of the buy-back value.
Buying at $50 with half your own cash
Buying 200 shares at $50 with 50% your own cash borrows $25.00 a share, or $5,000.00 in all. With a 25% maintenance level the call price is $25 / (1 - 0.25) = $33.33. At that price the equity is $33.33 - $25 = $8.33 a share, which is exactly 25% of $33.33. The price has fallen 33.33%, and the position has lost $3,333.33, shown as ($3,333.33).
Selling the same 200 shares short at $50 with 50% of your own cash and a 25% maintenance level gives a call price of $50 x 1.5 / 1.25 = $60.00. That is a 20% rise and a loss of ($2,000.00) on 200 shares. A bought position paid for entirely with your own cash has no loan, so no call can happen.
How a margin call works
When you borrow from a broker to buy shares, the shares are the security for the loan. If their price falls, your share of the value, which is your equity, shrinks while the loan stays the same. The broker sets a minimum equity level called the maintenance requirement. When your equity falls to it, the broker can ask you to add cash or sell shares, and it may sell positions itself if you do not respond.
The call price is the share price where that happens. It depends on how much you borrowed and on the maintenance level. A higher maintenance level, or a smaller share of your own cash, puts the call price closer to your entry. Short positions work the other way around, since they lose money when the price rises.
Why the percents are examples
Brokers set their own initial and maintenance requirements. They can differ by security, can be higher for volatile shares and can change at any time, even after you have opened a position. A broker may also act before the exact call price is reached. Use the figures from your own account, and treat the result as a simple estimate that leaves out interest, fees, dividends and day to day changes in your equity.
To size a position so that a loss stays within an amount you choose, use the Position Size Calculator. To work out profit on a trade, see the Stock Profit Calculator, and for the return per unit of risk the Sharpe Ratio Calculator. Borrowing to invest can lose more than you put in. This page is arithmetic, not advice.
Assumptions and limits
- The loan is a fixed amount per share. Interest, fees and dividends are not modeled.
- The percents are set once and do not change. Real requirements can change at any time.
- Own cash must be above 0 and at most 100. The maintenance level is 0 up to but not including 100.
- Nothing is stored or uploaded, and nothing here is investment advice.
Frequently asked questions
How do you calculate the margin call price?
For a bought position, divide the loan per share by one minus the maintenance level. With a $25 loan and a 25% maintenance level, the call price is $25 / 0.75 = $33.33.
What is the maintenance margin?
It is the minimum share of the position value that must be your own equity. When equity falls to that level, the broker can require more cash or sell holdings. The 25% in the example is a figure to replace with your broker's.
How is a short position different?
A short position loses money when the price rises. Your equity is the sale proceeds plus your cash minus the current cost to buy back, so the call price is above your entry. The page uses a separate formula for it.
Can a broker call before the call price?
Yes. Brokers can change requirements and act on their own rules, so the calculated price is an estimate and not a promise of when anything happens. Read your account agreement for the real terms.