What is Maintenance Margin? Definition, Formula, and Example
Maintenance margin is the minimum equity a trader must keep in a margin account after opening a leveraged position, set at 25% for long stock by FINRA and often higher by brokers.
What is Maintenance Margin?
Maintenance margin is the minimum amount of account equity you must hold to keep a leveraged position open. Initial margin gets you into the trade; maintenance margin keeps you in it. Under FINRA Rule 4210, the floor for long stock positions is 25% of the position's market value, and 30% for short positions. Brokers routinely set higher "house" requirements, commonly 30% to 40% for longs and far more for volatile or concentrated positions. When your equity falls below the maintenance requirement, the broker issues a margin call demanding cash or position reductions, and can liquidate without notice if you do not comply.
How Maintenance Margin Is Calculated
Account equity equals the market value of holdings minus the margin loan balance. The maintenance test is:
Equity ratio = (Market value − Margin loan) / Market value
You are margin deficient when the equity ratio drops below the maintenance requirement. The price at which a call triggers for a long position is:
Margin call price = Purchase price × (1 − Initial margin) / (1 − Maintenance margin)
With Regulation T initial margin at 50% and a 30% house maintenance requirement, the trigger price is Purchase price × 0.50 / 0.70, or about 71.4% of the purchase price. A 28.6% decline in the stock triggers the call.
For short positions, the math inverts: equity equals the short proceeds plus the initial margin deposit minus the current cost to buy back the shares, and rising prices erode equity.
Worked Example: Tesla on Margin
A trader buys 200 shares of Tesla (TSLA) at $250, a $50,000 position, using $25,000 of cash and a $25,000 margin loan under 50% initial margin. The broker's house maintenance requirement is 30%.
The margin call price is $250 × 0.50 / 0.70 = $178.57. If TSLA falls to $178.57, the position is worth $35,714, equity is $35,714 − $25,000 = $10,714, and the equity ratio is exactly 30%. One cent lower and the account is deficient.
Suppose TSLA drops to $160. The position is worth $32,000, equity is $7,000, and the equity ratio is 21.9%. The maintenance requirement is 30% of $32,000, or $9,600, so the call amount is $2,600. The trader must deposit $2,600 in cash, deposit marginable securities worth more than that, or sell roughly $8,700 of stock (sales reduce the loan dollar-for-dollar, so the required sale is the call divided by the maintenance rate: $2,600 / 0.30). If the trader does nothing, the broker liquidates positions at market without permission.
When Traders Use Maintenance Margin
Every leveraged trader lives inside this number. Swing traders holding through earnings calculate their exact liquidation price before the event and position-size so a normal adverse move cannot breach it. Short sellers face the harshest version: maintenance on shorts of hard-to-borrow names can reach 100% or more, and brokers raise house requirements without warning during squeezes, forcing covering at the worst prices. Portfolio margin accounts use a risk-based stress test instead of fixed percentages, but the principle is identical. Traders who want to feel how margin calls behave without real capital can run leveraged scenarios in the paper trading simulator.
Limitations and Common Misconceptions
The most dangerous misconception is that a broker must give you time to meet a call. Margin agreements permit immediate liquidation, and brokers exercise that right during fast markets, often selling your most liquid positions first. Another misconception is that the 25% FINRA floor is what applies to you; house requirements govern in practice and can change intraday on volatile names. Maintenance margin also says nothing about whether a position is good, only whether it is adequately collateralized. Finally, concentrated positions face amplified risk: a single-stock account at 50% initial margin is one 30% adverse move from forced selling, which is why leverage converts ordinary drawdowns into permanent losses.