A margin call comes into play when your trade or spread bet starts to go against you. Essentially, if you start losing money on your open positions, your spread betting provider will ask you to put up more cash (known as a margin call).
And what happens if you don’t or refuse to? Well, they are likely and entitled to close out your position and confirm your loss which you will have to settle in full.
This is all because spread betting uses the concept of trading on margin (i.e. borrowing money to take your bet).
Likely to receive a sliding scale of warnings
Providers will usually notify first before closing out a position automatically. For example, one provider sends an email if your equity drops below 99% of margin, but will automatically close positions if your equity drops below 50% of your margin.
So what’s the lesson here? Keep enough capital in your account if you are planning to take big bets and understand that a a spread betting provider can auto close your positions (and in this case it’s probably in everyone’s interest).
The concept is an important one to be aware of – so much so that it even has a movie named after it starring Kevin Spacey!