The Essence of a House Call in Margin Trading
A house call is a brokerage firm’s demand that an account holder adds enough funds to cover a deficiency in a margin account—usually following losses in the investments purchased on margin. This request is made when the account balance drops below the maintenance margin required by the brokerage firm, compelling the account holder to ensure the minimum requirements are met. Failure to comply within the specified time leads to the liquidation of the account holder’s positions without further notice.
Key Insights
- A house call emerges when the account dips below the brokerage’s required margin balance.
- Margin buyers leverage funds from the brokerage (
Related Terms: margin call, leveraged investing, marginable securities, portfolio margin
References
- Financial Industry Regulatory Authority. “Margin Regulation”.
- U.S. Securities and Exchange Commission. “Investor Bulletin: Understanding Margin Accounts”.
- Fidelity. “Balances”.
- Charles Schwab. “The Charles Schwab & Co. Guide to Margin”. Page 7.
Get ready to put your knowledge to the test with this intriguing quiz!
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Below are 10 quizzes regarding the financial term "House Call" based on the information available from Investopedia, formatted in Markdown using the Quizdown-js syntax:
## What is a House Call in terms of finance?
- [x] A demand from a broker to an investor to deposit additional money or securities to cover potential losses
- [ ] A phone call made by a real estate agent to a client
- [ ] A visit to a client's home by an insurance agent
- [ ] An IRS audit taking place at a taxpayer's home
## When is a House Call typically issued?
- [x] When the value of securities in a margin account falls below a certain level
- [ ] When an investor opens a new brokerage account
- [ ] When an account generates exceptionally high returns
- [ ] When tax-filing deadlines are approaching
## Which of the following is another term often used interchangeably with House Call?
- [ ] APP (Account Performance Call)
- [x] Margin Call
- [ ] Equity Assurance Call
- [ ] Threshold Alert
## What is usually required of an investor when a House Call is issued?
- [ ] Close the account immediately
- [x] Deposit cash or securities into the account to cover the shortfall
- [ ] Withdraw all securities from the account
- [ ] Pay an upfront fee to avoid future calls
## What can happen if an investor fails to meet a House Call?
- [ ] The broker may issue a warning
- [x] The broker may liquidate some securities in the account to cover the shortfall
- [ ] No action will be taken
- [ ] The investor will receive a tax penalty
## In which type of account is a House Call most likely to occur?
- [ ] Retirement account
- [x] Margin account
- [ ] Savings account
- [ ] Checking account
## Which market condition might lead to more frequent House Calls?
- [ ] Stable markets
- [x] Volatile markets
- [ ] An extended bull market
- [ ] A bear market decrease
## A House Call is aimed primarily to protect who?
- [ ] Government
- [x] Broker
- [ ] Investor’s personal savings
- [ ] Insurance company
## Which represents a preventive action to avoid receiving a House Call?
- [x] Maintaining a higher level of equity in the margin account
- [ ] Cutting back on expenses
- [ ] Investing in REITs
- [ ] Always paying with a credit card
## House Calls can predominantly involve which financial product?
- [ ] Real estate funds
- [ ] Fixed-term deposits
- [x] Leveraged investments
- [ ] High-yield savings accounts
These questions are designed to test your understanding of the term "House Call" and its context within financial markets.
