Margin Call & Maintenance Ratio Calculator

Understanding the margin call calculator — concept and principle

When you borrow from a broker to buy securities, the securities serve as collateral, and the broker requires that collateral to stay above a minimum relative to the loan. If prices fall below that level, you get a margin call: you must deposit cash or reduce the loan. This calculator works with a maintenance ratio expressed as collateral ÷ loan, the convention common in Korean stock-credit accounts (often 140%), and shows how far prices can fall before a call.

How it is calculated

Let V be the market value of the securities, L the loan and m the required ratio as a decimal.

• Maintenance ratio = V ÷ L.
• Equity = V − L; required collateral = m × L.
• Shortfall (cash to deposit) = max(0, m × L − V).
• Price fall to a margin call = max(0, 1 − m × L ÷ V).
• If you instead sell securities and use the proceeds to repay the loan, the amount needed is (m × L − V) ÷ (m − 1), because selling lowers the collateral and the loan at the same time.

The principle

The loan stays fixed while the collateral moves with the market. A call is triggered when V falls to m × L, so the safe distance is the gap between today's V and that threshold. US brokers usually express the same idea as equity ÷ market value: FINRA's minimum maintenance is 25%, and many firms require 30% or more. A 25% equity requirement corresponds to a collateral-to-loan ratio of 1 ÷ 0.75 ≈ 133%; a 140% collateral ratio corresponds to equity of about 28.6%.

Worked example

Default inputs: securities $28,000, loan $15,000, required ratio 140%.

1. Ratio = 28,000 ÷ 15,000 = 186.7%, above 140%, so no call.
2. Equity = 28,000 − 15,000 = $13,000.00.
3. Required collateral = 1.40 × 15,000 = $21,000.00; shortfall $0.00.
4. Price fall to a call = 1 − 21,000 ÷ 28,000 = 25%.

How to read the result

The fall-to-call figure is your buffer. A stock that often moves 25% in a few weeks offers little protection at that buffer. If a call comes and is not met by the deadline, the broker may sell your holdings, often at poor prices. In Korea this forced sale is called 반대매매.

Common mistakes

• Mixing the two conventions (collateral ÷ loan versus equity ÷ value).
• Forgetting accrued interest, which raises the loan over time.
• Ignoring that brokers can raise requirements for volatile or concentrated holdings.
• Thinking that selling to repay needs the same amount as a cash deposit; it needs more.

Frequently asked questions

What is a margin call?

A demand from the broker to add cash or securities, or reduce the loan, because collateral fell below the requirement.

How fast must I respond?

Deadlines are set by the broker, often a few days or less, and positions may be sold without notice.

Does depositing more stock help?

Usually yes, but brokers may value deposited securities below market price.

Sources: FINRA Rule 4210, Margin Requirements · Federal Reserve Board, Regulation T