Losing more money than your portfolio worth while trading on margin money.
One of my friend lost more money than their entire portfolio worth recently. They are very new to margin investing and option trading. They owned silicon valley bank $SIVB stocks on margin and the bank went belly up overnight. The stock got halted pre market and they didn’t get chance to get out of the trade until the stock was un halted in pink sheets for pennies. Interactive broker liquidated their entire portfolio and now they owe some $40K to IB. Their portfolio balance is -$40K. Has anyone faced similar issue before? What happens if you owe margin money to broker? Is there anything like margin loss protection that limits your max loss to 100% of your portfolio value? Can and will the broker pursue legal action to recoup the owed amount? Is there any merit in reaching out to lawyers? Theirs is a single earner family of 5 (husband, wife and 3 school going kids) with ~$90K annual income. It is a huge amount for them that they will take a few years to save. Their family is under too much stress and I am trying to see if there is some hope for them. #finance
have they looked into personal loans? can also pick up some side gigs to help pay it off. Grand scheme of things 40k is not too bad, smaller than typical student loan idk what you’re expecting from a lawyer, bankruptcy? that will ruin credit for years and affect job search
Set up a gofundme perhaps. Money will have to be paid. This was a very unusual situation with svb. Usually there's time to sell. But recent moves even with large caps like META have beem brutal on the downside.
Biden will bail them out
You seem like a good friend
101 for any venture, don’t do what you don’t understand. If your friend had no idea how margin/margin calls work, they should not have engaged in it. There is no margin loss protection. They have to pay up the money. Maybe file for bankruptcy 🤷🏼♂️. Ask a lawyer.