Enter the amount per share borrowed, and the maximum percentage of borrowed funds allowed to determine the maintenance margin.

## Maintenance Margin Formula

The following formula is used to calculate a maintenance margin.

MM(\$) = \$BPS / (%BA/100)

• Where MM(\$) is the maintenance margin (\$)
• \$BPS is the amount borrowed per share (\$)
• %BA is the maximum percentage allowed to be borrowed against the shares.

## Maintenance Margin Definition

A maintenance margin is defined as the minimum equity per share that an investment is required to have on hand in order to avoid a margin call. In other words, the minimum price a share can hit before a margin call is issued.

## How to calculate maintenance margin?

First, determine the amount of money borrowed per share from your broker for the trade. To calculate this, simply multiply the market price by 1 minus the margin requirement. In this example, the margin requirement is 40% and the purchase price was 30\$, so the amount borrowed per share is 30\$*(1-.40) = \$18 per share.

Next, determine the maximum percentage of borrow allowed by the maintenance margin of the broker. In this example, the maximum amount allowed to be borrowed is 80%.

Finally, calculate the maintenance margin amount per share using the formula above:

MM(\$) = \$BPS / (%BA / 100)

= \$18.00/.80

= \$22.5 per share of maintenance margin

This is the lowest the share price can fall before being issued a margin call. Margin calls are actions taken by brokers that require an investor to cover the costs of their losses.