Margin call

A margin call is a demand from a broker or clearing house for a futures trader to deposit more cash after a losing position has eroded the collateral on account.

Futures trading requires posting margin, a deposit held as collateral against possible losses, rather than paying the full value of the contract up front. As a position loses money, the collateral on account shrinks, and once it falls below a required level, the broker or clearing house issues a margin call demanding more cash to bring it back up.

A trader who cannot meet a margin call has their position closed out by the broker, often at a loss, regardless of whether the market might have recovered later. Margin calls can arrive quickly during sharp price moves, and a wave of them across many traders holding the same losing position can itself accelerate a price move, as forced selling or buying adds to whatever pressure started it.