You are bearish on Telecom and decide to sell short 260 shares at the current ma

Question

You are bearish on Telecom and decide to sell short 260 shares at the current market price of $90 per share. a. How much in cash or securities must you put into your brokerage account if the broker's initial margin requirement is 50% of the value of the short position? (Omit the "$" sign in your response.) Cash or securities to be put into brokerage account $ 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. Omit the "$" sign in your response.) Margin call will be made at price $ or higher

Explanation / Answer

Total short sell value = 170*70=$11900

Intial margin requirement = 50%

Cash or securities must put into account =11900*50%=$5950

Maintenance margin requirement = 30%

Price before margin call will be received = (intial margin/maintenance margin%)/no of shares

= (5950/30%)/170

=$116.67

when the price per share will be 116.67 total value will be 19833.33(116.67*170) and 30% of same comes 5950 which is margin requirement. The movement actual price will cross 116,67 maiintenance margin will be short and margin call will be received.

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