Listen to a Business English Dialogue About Margin call
Keith: Sarah, have you ever heard of a margin call?
Sarah: No, what’s that?
Keith: It’s when a broker demands additional funds from an investor to bring the margin account back to the required level, usually because the value of the securities in the account has fallen below a certain threshold.
Sarah: That sounds stressful. How do you avoid getting a margin call?
Keith: One way is to make sure you have enough funds in your account to cover any potential losses and to be cautious about leveraging too much of your investments with borrowed money.
Sarah: What happens if you can’t meet a margin call?
Keith: If you can’t meet a margin call, the broker may liquidate some or all of your securities to cover the shortfall, which could result in significant losses for you.
Sarah: That sounds risky. Why would anyone use margin trading if it carries such risks?
Keith: Some investors use margin trading to amplify their potential returns, but it’s important to understand the risks involved and only use it if you’re confident in your ability to manage those risks.
Sarah: So, would you recommend using margin trading?
Keith: It depends on your risk tolerance and investment goals. Margin trading can be lucrative, but it’s not suitable for everyone and requires careful management to avoid getting into financial trouble.
Sarah: How can someone know if they’re ready for margin trading?
Keith: It’s important to have a solid understanding of the market, a well-thought-out trading strategy, and enough financial cushion to handle potential losses before considering margin trading.
Sarah: Thanks for the advice, Keith. I’ll definitely do more research before considering margin trading as an option for my investments.
