Mini Bite: Margin Call Calculation

In this 5-minute video, Mike explains how to calculate margin call amounts. Margin calculations are a key topic tested on many financial industry exams such as the Series 7 and the CFP exam. Margin calculations can be complicated with many moving parts, but in this video Mike breaks it down in an easy to understand step by step process.
The Boston Institute of Finance’s Mini Bite video series aims to tackle key financial planning topics that are both important in practice and testable on CFP® Board’s certification exam.
Watch more "Mini Bites" here: www.bostonifi.com/bif-bites/t....

[@kerriebarney5823]

I wasn't following this at all in my college finance class, and you made it crystal clear. Thank you so much!

[@kosmasstollas6068]

YOU ARE EXCELLENT. I TRY ONE YEAR TO UNDERSTAND HOW IS WORKS AND ONLY WITH YOU TOOK ME 10 MINUTES. THANK YOU

[@henryhache5509]

I have a Series 7 & 65, studying for CFP...and yet can not get this through my skull....until now! Many thanks!

[@johannel8104]

My broker can't even explain this to me. I figured it out today but in a more roundabout way. Esp the calculation on a PER SHARE basis (mine is simple since I only hold one equity) was what I wanted. This simplifies it tremendously!!! Thanks so much!

[@cholomiranda1418]

This really helped. Was scouring IBKR on how this is computed, but you presented this concept in a concise and easy to understand manner. Kudos Sir! Thank you.

[@nhanphung1193]

Thanks so much!! This is the video i've been looking for to get a crystal clear picture about margin.

[@luva74]

Thank you. Your presentation was easy to follow and understand.

[@jumpmanyang3117]

Love this video! wonderful job

[@Swiss_Chemist]

Heck yea! Been looking for this for the last 24 hours lol just needed a simple math explanation

[@FeedThemCake]

Just to make things simpler for people who'd like a formula that accounts for leverage, it is: Price of Margin Call = (Entry Price * (1-(1/leverage)))/(1-Maintenance Margin)

[@TwampGod]

What happens if you were to sell shares to get back to the maintenance margin? When you sell the shares does the cash received pay down the debt? And then you recalculate the maintenance margin with the subtracted debt?

[@sanjeevgarg4355]

Thank you sir It was great

[@TAPPChannel]

So why my margin margin maintenance got increased over night by 3000$? How I can calculate this?

[@Qwuiet]

What if my portfolio is comprised of stocks that each has a different margin requirement?

[@boston-institute-of-finance]

Margin is calculated on a security-by-security basis so you have to go through the calculation for each individual security.

[@expelleddux]

Ill add that the last amount is how much you need to add to deposit to partially repay the loan rather than pledging more assets. correct me if I'm wrong.

[@boston-institute-of-finance]

You are not necessarily repaying the loan when you deposit more funds during a margin call. You are adding more collateral to your account to cover any losses should you be forced to close a position. Like any lender, brokerage firms want to make sure that their loans are secured. If an account with margin falls below the brokerage firm’s maintenance requirements the firm will require additional funds (or securities) to be deposited and put in escrow in order to bring the account back into compliance.

[@namiller01]

@@boston-institute-of-finance But in this example, you added $800 in just cash, you bring the account balance to $6,800. 5,000/6,800 = 73.5%, still below the 30% maintenance margin. If your loan balance was staying static at $5,000 wouldn't the account value have to get back to $7,143 as in question 2? You are assuming the $800 goes toward paying down the loan. Therefore = 4,200 / 6,000 = 70%.

[@TwampGod]

@@boston-institute-of-finance but what if you sell some of the shares to meet the margin requirement. How does that work? I've yet to see a video that explains that math.