How to use it
- Enter the purchase price and number of shares.
- Enter the initial margin you paid (50% means half your money, half borrowed).
- Enter your broker’s maintenance margin.
- Enter the current price to check where you stand now.
Formula
- Purchase value = price × shares; loan = purchase value × (1 − initial margin)
- Equity = current price × shares − loan
- Equity share = equity ÷ (current price × shares)
- Margin call when the equity share falls below the maintenance margin m
- Margin call price = loan ÷ (shares × (1 − m))
- Cash to restore = m × current value − equity
Worked example
200 shares at 50 with 50% initial margin and 25% maintenance:
- Purchase value 10,000, loan 5,000.00.
- Margin call price = 5,000 ÷ (200 × 0.75) = 33.33, a 33.33 % fall.
- At 40: value 8,000, equity 3,000.00, 37.5 % of the position: no margin call.
- At 30: value 6,000, equity 1,000.00 = 16.67%, a margin call; you need 0.25 × 6,000 − 1,000 = 500.00 in cash.
Tips
- The more you borrow, the closer the call price: at 70% initial margin the same stock is called only at 50 × 0.3 ÷ 0.75 = 20.
- Brokers may sell your shares without waiting if the account falls fast, so the call price is a line to stay well above.
- Selling shares to meet a call reduces the loan and the position at the same time.