Whether you’re seeing margin calls today, or not, it’s important to be aware of the warning signs. If you’re in a highly concentrated investment, you might face margin calls. However, if you have a diversified portfolio, you probably haven’t experienced margin calls, according to certified financial planner Alex Klingelhoeffer of the Oklahoma City office of Exencial Wealth Advisors. Margin calls aren’t necessarily a sign of an upcoming market decline.
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Most people will notice margin calls as a large banner on the website when they log in to their accounts. A margin call can make it difficult to pay off the debt, but there are ways to respond. Some methods will give you more credit than others, and some may even prevent you from losing any of your equity. When you respond to a margin call, it’s important to understand that not all methods will result in a profit, so be sure to check out your options.
Automating margin calls is one way to minimize error. Historically, margin calls were separated from the rest of the firm’s systems, relying heavily on faxes, emails, and manual processes. This has led to inefficiency, poor transparency, and high error rates. While margin calls are manageable in non-volatile times, they can become unmanageable during high volume and volatility. This is why firms should not delay investing in margin call software.
