What triggers a 'margin call'?

A 'margin call' is triggered when an investor's equity in a margin account falls below the required maintenance level set by the brokerage. This scenario indicates that the investor does not have sufficient equity to cover the potential losses from their leveraged positions, and the brokerage demands that additional funds or securities be deposited to restore the account to the necessary minimum equity level.

The need for a margin call arises because margin accounts allow investors to borrow money to purchase securities. If the value of the securities declines, this can lead to a decrease in the equity that the investor actually holds. Once the equity falls below the threshold established by the brokerage, a margin call is issued to protect the lender and ensure that the investor can cover any outstanding debts related to the borrowed funds.

Other options, while related to market activity and could impact trading decisions or individual positions, do not directly cause a margin call. For instance, profits exceeding expectations, unexpected market crashes, or significant declines in the value of a commodity might influence an investor's decisions or overall market conditions, but they do not specifically trigger the requirement to add funds to a margin account. The key factor in a margin call is the relationship between the investor's equity and the brokerage's required threshold.