Investors, who buy shares of stock or other securities partly with their own funds, and partly with funds borrowed from the broker, are buying on margin. Buying on margin provides leverage, that is, an opportunity to magnify investor gains from given size if the stock price rises. At the same time, buying on margin increases investment risk, because the investor’s losses also increase if the stock price if the stock price falls.

When stock price falls, moreover, the broker may send a margin call to the investor, requiring that the investor contribute funds to restore the original equity (ownership) balance in the position.