What is a Concentrated Maintenance Call?
A Concentrated Maintenance (CM) call is a type of margin maintenance call and happens when your brokerage portfolio value drops lower than your margin maintenance requirement and you’re in a concentrated position.
Being concentrated means you hold at least 70% of your brokerage portfolio in a single security. When this happens, the maintenance requirement for the security you're concentrated in may be increased.
While your investing account has a CM call, we’ll prevent you from buying securities to avoid increasing the amount of the call.
You'll need to deposit money or close positions to return your account to good standing. If you’re unable to deposit or close positions by the date your call is due, we may liquidate your positions to cover the call.
We reserve the right to close some or all of your positions at any time when you're in a margin call.
Let’s say you end the day with $650,000 of margin used, and 100% of your securities portfolio is invested in YOWL. If the total market value of your YOWL shares is $1,000,000, your brokerage portfolio value would be $350,000. If YOWL’s margin maintenance increased to 40% because of being concentrated, it’d result in a concentrated maintenance call of $50,000. The call would cover the difference between the brokerage portfolio value of $350,000 and the maintenance requirement of $400,000.
Deposit cash: In the previous example, you can deposit $50,000 to cover the call, or sell $50,000 in non-marginable securities.
Sell non-marginable securities: In the previous example, you can sell $50,000 in non-marginable securities to cover the call. Non-marginable securities have a 100% maintenance requirement. You can sell 1x the call amount because these securities get a 100% release from sales.
Sell marginable securities: In the previous example, you can sell marginable securities to cover the call. Marginable securities have a maintenance requirement less than 100%, meaning that you won’t get the full dollar value of your sales applied to your CM call. You'll need to take the call amount of $50,000 and divide it by the maintenance requirement of the position you are selling to determine the dollar value of the shares you would need to sell to cover the call.
If your call amount is $50,000, you'd need to sell $125,000 of marginable securities with a maintenance requirement of 40% to meet the call: $50,000 divided by 0.40 = $125,000
Any examples provided are for illustrative purposes only. All investments involve risk and loss of principal is possible. Margin trading involves interest charges and risks, including the potential to lose more than any amounts deposited or the need to deposit additional collateral in a falling market. Before using margin, customers must determine whether this type of trading strategy is right for them given their specific investment objectives, experience, risk tolerance, and financial situation.
For more information, review FINRA’s Investor Alert and our Customer Relationship Summary, Margin Disclosure Statement, and Margin Account Agreement. These disclosures contain important information on Robinhood’s UK products and services, conflicts of interests, lending policies, interest charges, and the risks associated with margin investing enabled accounts.