Question

You are bearish on Telecom and decide to sell short 100 shares at the current market price of $45 per share. a. How much in cash or securities must you put into your brokerage account if the broker's initial margin requirement is 50% of the value of the short position? Initial margin b. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short position? (Round your answer to 2 decimal places.) Stock price reaches C

Answer 1

Initial Margin = 100*45*50% = $2,250

b.Maintenance Margin per share = 45*30% = $13.5

Rise in price required = 45*50% - 13.5

= $9

Hence, call will be when stock price reaches 45+9

= $54