what is the margin rate currently if I shorted 100 shares of a $50 stock last...
what is the margin rate currently if I shorted 100 shares of a $50 stock last week, with a 45% margin requirement and today the price is $40
Homework Answers
Number of shares shorted - 100
Price of the stock when shorted - 50
Total value of stock - 100 * $50 = 5000
Total margin utilised while shorting the shares 45%. Hence 45% on 5000 = 2,250
Hence in total investment of $5000 your contribution was $2,750 and $2,250 was on margin
Today's value of stock = 100 * $40 = 4000
Now total value of stock would be
you sold at $5000
you can buy as $4000
So difference would be 5000-4000 = 1000
This $1000 would be adjusted in your portfolio. So initial margin was 2250 and the required margin now would be 1250
So Margin rate now would be as below :-
Total Price of the stock - Funds available / Total value of stock = 4000-2750/1250 = 0.3125
= 31.25 %
So the current margin in 31.25 %
Note - Brokerage/Margin fees not added in this calculations
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