Track 9 of 25

Margin call mechanics

What happens, in what order, on what clock, and who decides. How a shortfall is computed, whether a cure window exists, what the lender may sell and in what order, and why curing by sale shrinks both sides of the ratio at once.

25 lessons

Mark a lesson complete and it is remembered here.

A call is a test failing, not a decision being madeNo one chose to call you. A threshold was crossed and a report was generated.6 min
How a shortfall is computed, line by lineThe interest that accrued while you did nothing can be larger than the gap the notice reports.6 min
The same shortfall stated in collateral and in cashA gap of sixteen thousand can require sixteen, twenty-six or forty-two thousand, depending only on the route.6 min
Who computes it, and on what clockThe test runs while you are asleep, on prices that stopped moving hours before, and nobody reviews it.7 min
Intraday valuation against end-of-day valuationA day that closes fine can still have failed, and which fact counts depends on when the test ran.6 min
The cure window, and whether it exists at allTime to fix a shortfall is time for the shortfall to grow; the window is not free.7 min
What payable on demand does to a cure windowThe gap was twenty-one thousand and the amount that can be required is the whole balance.6 min
Same-day, next-day, and no-day curesThe deadline changes who chooses the securities and the price, and changes the arithmetic not at all.6 min
Notice: what it is and what it is notA notice records a failed test; it does not create the right to sell, which you granted at signing.6 min
What the lender may sellThe permission is over everything pledged, and it is rarely a permission to stop at the threshold.6 min
In what order the lender sellsThe sequence is chosen for certainty of execution, and cash inside the pledge is not outside cash.6 min
Why the most liquid holdings go firstSelling what is easy leaves behind what is hard, and the remaining collateral counts for less afterwards.7 min
Why curing by sale shrinks both sides of the ratioSelling exactly the gap leaves a smaller gap, and the leftovers form a series that never quite ends.6 min
The forced-sale multiple, derived from scratchFour lines of algebra produce a number fixed by the threshold alone and knowable before anything fails.7 min
How the multiple changes with the thresholdA generous threshold delays the first call and enlarges the cure, and both effects come from one term.7 min
Why a partial cure can leave the test still failingA ninety-thousand-dollar sale closed twenty-seven thousand nine hundred of the gap and left the account in breach.7 min
The second call inside the firstOnce you sit exactly on the threshold, any further fall creates a gap proportional to the whole balance.6 min
Cross-collateralisation and the call that reaches another accountThe shortfall is computed on the total, and the sale lands wherever selling is easiest, not where the loss happened.7 min
What happens to a hedge when the lender sells the sharesProtection outlives the position it protected, and what was a hedge becomes a directional bet nobody placed.6 min
The cost of the cure itself: fees, interest, and the spread paidFive small frictions on one sale came to two percent of the gap they were closing, and a sixth arrives every year.6 min
Settlement: the days between a sale and the cashCollateral leaves on the trade date and the repayment arrives later, so the ratio can worsen in between.6 min
A call that arrives during a halt or a gapWhen one holding cannot be priced or sold, the entire cure is extracted from the holdings that can.8 min
Cut-offs, weekends, and a clock that is not yoursEleven minutes late, a sale priced at the next day's valuation and left the cure incomplete.7 min
Reinstatement, and what it does not restorePassing the test again returns you to compliance and to nothing else, including a bill on a different clock.6 min
One call, end to end, on a single timelineA thirty-thousand-dollar gap became a hundred-and-twenty-eight-thousand sale and a residual of two hundred and seventy-nine dollars.8 min

Educational only. Nothing in this track is investment, legal or tax advice, or a recommendation to enter into any transaction. Completion is stored in this browser and nowhere else.