Re:GameStop Is Rage Against the Financial Machine
by ohyes on Wednesday January 27, 2021 @06:43PM
(#25935761)
Margin accounts.
You buy the stock for $200 but of the $200, $100 is money that you've borrowed. Because the stock is now at $350 your assets cover the margin easily. but if the suddenly becomes liquid and gaps down to $2, you owe $100 and only have $2 dollars in assets with which to cover your margin loan. You get a margin call and the bank force sells your stock then takes your car, your house, etc to cover the $98 you still owe.
You buy the stock for $200 but of the $200, $100 is money that you've borrowed. Because the stock is now at $350 your assets cover the margin easily. but if the suddenly becomes liquid and gaps down to $2, you owe $100 and only have $2 dollars in assets with which to cover your margin loan. You get a margin call and the bank force sells your stock then takes your car, your house, etc to cover the $98 you still owe.