What to Do about a Margin Call

What to Do about a Margin Call

One last bit of wisdom. Never answer a margin call. If the stocks you have in your margin account collapse in value to a point where your stockbroker issues a margin call for you to put up money or sell stock, don't put up money—think about selling stock. Nine times out of ten you will be better off, because the marketplace is telling you that you are on the wrong path and things aren't working. So sell and cut back your risk level. Why put good money after bad?


To buy on margin you will need to sign a margin agreement with your stockbrokerage firm and have your stock certificates held in street name (the brokerage company name). As long as you're dealing with an established New York Stock Exchange firm, this should not create risk for you.

There is a great advantage in having stock held in street name, as it avoids tremendous paperwork and time on your part that would otherwise be spent keeping up with stock certificates, dividends, and stock splits. It also eliminates time and trouble taking securities back and forth to your broker each time you conduct a transaction. And it averts problems and notorious delays with transfer agents, whose work it is to collect, register, transfer, and mail certificates.

The itemized monthly statements of your account, provided by most brokers, will also give you


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