A margin call occurs when the equity in your Individual, Joint Brokerage, or Trust Account supporting your M1 Margin Loan drops below required maintenance levels. This article explains what triggers a margin call, how it works on M1, what steps you should take, and how to manage margin investing risks.
What is a margin call?
A margin call is a request to deposit additional funds or liquidate assets to restore your account equity to the required maintenance margin. If the equity in your margin account falls below the minimum required—due to market changes, increased margin requirements, or other factors—M1 will notify you of the margin call and the amount needed to resolve it.
Causes of margin calls
There are two main reasons you might receive a margin call:
1. Market depreciation
If the value of your investments decreases, the equity in your account may fall below the margin requirement.
Fees or interest on your margin loan can also reduce your equity.
2. Increased margin requirements
Changing portfolio allocation: Rebalancing your portfolio into assets with higher margin requirements can increase your maintenance margin requirement and trigger a call.
Broker or clearing firm changes: M1 or its clearing firm may raise margin requirements on certain securities based on volatility or other risk factors.
How M1 calculates and issues margin calls
Core terms
Account Value: Total of your cash plus investments.
Margin Loan Balance: Amount you've borrowed.
Equity: Account Value minus Margin Loan.
Maintenance Margin Requirement: Minimum equity required, typically 25% of market value but can be higher for specific securities or risk profiles.
Excess Equity: Your equity minus the maintenance margin requirement. If this is negative, you receive a margin call.
Example: Calculating a Margin Call
Total account value: $50,000 ($49,000 in securities, $1,000 cash)
Margin loan: $10,000
Standard maintenance requirement: 25%
Result: You currently have $27,750 in excess equity, so no margin call is issued.
Scenario 1: Market Value Drops
To find the account value at which a margin call would be triggered, use:
(Margin Loan – Cash) / (1 – Margin requirement rate)
($10,000 – $1,000) / (1 – 0.25) = $9,000 / 0.75 = $12,000
Let’s look at the numbers right before the margin call when the portfolio value drops to $13,000, and $1,000 stays uninvested as cash.
Result: Excess equity remains positive; therefore, no margin call is issued.
If your investments drop so the portfolio value (excluding your $1,000 cash) is below $12,000, you would receive a margin call.
If portfolio value drops to $11,000, below the previously calculated $12,000 threshold: we see that the excess equity is negative.
Result: You would receive a margin call for $750.
Scenario 2: Portfolio Rebalance to Higher Margin Requirements
If you rebalance into riskier securities with a 100% margin requirement:
Required margin = $50,000 × 100% = $50,000
Equity: $50,000 – $10,000 = $40,000
Excess equity: $40,000 – $50,000 = -$10,000
Result: You would receive a margin call for $10,000.
What happens after a margin call
M1 notification: You’ll receive an email from M1 specifying the margin call amount and instructions.
Timeframe to act: Clients generally must resolve the margin call within 3 business days, but immediate action is strongly recommended.
How to satisfy the call:
Deposit cash into your margin account
Liquidate (sell) securities to reduce your margin loan or increase equity
Forced liquidations: If you do not meet the margin call in time, M1 may sell your securities—even without additional notice—to cover the required margin. This may result in losses or tax consequences.
Monitoring and preventing margin calls
How to check your margin health
Your M1 Margin Loan Dashboard is the best place to see a wholistic view of your portfolio’s margin activity and health. Here you can review your account equity, current margin loan balance, and maintenance requirements.
Tip: Monitor your account regularly, especially during volatile markets or when making substantial investments or portfolio changes.
Best practices for managing margin
Borrow less than your maximum available margin to maintain a buffer above minimum requirements
Diversify your investments to reduce risk
Review M1 notifications promptly
Don’t ignore margin calls—act quickly!
Contact M1 Client Success if you have questions or concerns
What to do if you receive a margin call
Read the notification from M1 carefully
Check your margin call amount and deadline
Deposit funds or sell securities as instructed
Confirm your account now meets the maintenance margin requirement
Risks of margin investing
Potential losses greater than your initial investment
Forced sales and tax implications
Sudden changes in margin requirements
Market volatility can trigger rapid margin calls
Frequently asked questions (FAQs)
What if I can't meet a margin call?
If you do not deposit additional funds or sell sufficient securities, M1 may liquidate part or all of your portfolio to cover the margin call—potentially at a loss and without further notice.
How will M1 notify me about a margin call?
M1 will notify you by email and may also notify you in the app. Keep your contact information up-to-date to ensure you receive margin call alerts promptly.
Can M1 change margin requirements without notice?
Yes, M1 and its clearing firm reserve the right to change margin requirements at any time, especially for certain volatile securities or market conditions. These changes may trigger a margin call on short notice.
Are margin calls only triggered by market drops?
No, they can also happen if you rebalance into riskier investments, if fees accrue, or if M1’s required margin percentages change.
Brokerage accounts on the M1 platform are either fully disclosed to APEX Clearing or cleared through M1 Finance LLC. Please look at your account statement to determine how your account is cleared.
All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future performance. Using margin can add to these risks. Users utilizing APEX cleared margin accounts should review the APEX margin account risk disclosure before borrowing. Users utilizing M1 cleared margin accounts should review the M1 margin account risk disclosure before borrowing. M1 Margin Loans are available on margin accounts with at least $2,000 invested per account. Not available for Retirement or Custodial accounts. Margin rates may vary.
Brokerage products and services are offered by M1 Finance LLC, Member FINRA / SIPC, and a wholly owned subsidiary of M1 Holdings, Inc.
All examples above are for informational purposes and should not be considered an offer to buy or sell certain securities. M1 does not provide investment advice.
This content was generated using artificial intelligence and is intended for informational and educational purposes only. While reasonable efforts are made to ensure accuracy, AI-generated outputs may omit key context; and should not be construed as financial, investment, legal, or tax advice. Users should independently verify all information and consult a qualified professional before making any financial decisions.
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