Specifically, what happens if my current position is already close to (or at) the maintenance margin level and the exchange then increases margin requirements?
For example,
- First Day (end-of-day):
- Initial Margin = 1000
- Maintenance Margin = 800
- Position = 10 contracts
- Account Balance = 8001
- Maintenance margin requirement = 10 * 800 = 8000
- Therefore, margin requirements satisfied.
- Overnight, due to recent volatility in the market, the exchange decides to increase margin requirements to 1200/1000.
- Next Day (open):
- New Initial Margin = 1200
- New Maintenance Margin = 1000
- Position = 10 contracts
- Account Balance = 8001
- Maintenance margin required = 10 * 1000 = 10000
- Therefore, margin requirements not satisfied.
What happens on the open of this next day? Will the broker issue a margin call? Will they liquidate a part of the position to bring the account into alignment with the new requirements? How do professionals handle this situation?
Thank you for any and all guidance you can give!