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Margin when entered into a derivative contract
A derivative contract can be an option, and you can take a short (sell) position , much the same way you would in a stock. When BUYING options you risk only the money you put in. However when selling naked(you don't have the securities or cash to cover all potential losses) options, you are borrowing. Brokers force you to maintain a required amount of cash called, a maintenance requirement. When selling naked calls - theoretically you are able to lose an INFINITE amount of money, so in order to sell this type of options you have to maintain a certain level of cash in your account. If you fail to maintain this level you will enter into whats often referred to as a "margin-call". And yes they will call your phone and tell you :). Your broker has the right to liquidate your positions in order to meet requirements. PS: From experience my broker has never liquidated any of my holdings, but then again I've never been in a margin call for longer then a few days and never with a severe amount. The margin requirement for investors is regulated and brokers follow these regulations.