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Assume you sell short 100 shares of Shell Corp. at $100 per share, with initial margin...

Assume you sell short 100 shares of Shell Corp. at $100 per share, with initial margin at 45%. The minimum margin requirement is 30%. The stock will pay no dividends during the period, and you will not remove any money from the account before making the offsetting transaction. 1. At what price would you face a margin call? 2. If the price is $110 at the end of the period, what is your margin ratio at that point?

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Answer #1

1.
(100*100+100*100*45%-100*S)/(100*S)<30%
=>S>111.53
At price of more than 111.53, one will get margin call

2.
=(100*100+100*100*45%-100*110)/(100*110)
=0.318181818

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