Margin

Question 1

60% margin requirement - You make 100k investment. 2000 shares of XYZ. Value drops to 80k. Maintenance is 35% What is the current equity? What is the current margin?

Answer 1

$80,000 - $40,000 = $40,000 current equity

Then current margin is $40,000/$80,000 = 50%

Question 2

60% margin requirement - You make 100k investment. 2000 shares of XYZ. Value drops to 80k. Maintenance is 35%. How low can share price go before you reach maintenance?

Answer 2

Amount borrowed / 1 -.35
$40,000/.65 = $61,538
$61,538/2000 = $30.76
At a value of $61,538 the equity is $61,538 - $40,000 = $21,538
To get back to 60% you take
.6 * $61,538 = $36,923 equity needed
$36,923 - $21,538 = $15,385 cash must be added

Question 3

You sell company short at $50 - $5,000 proceeds. Stock goes to $40 - what is your profit

Answer 3

You buy back to cover at $40, -$4,000

$5,000 - $4,000 = $1,000 profit

Question 4

Reg T margin requirement

Answer 4

50%

Question 5

Margin call formula

Answer 5

Debt balance
————————
1 - maintenance margin %

Question 6

Margie buys $100 shares of a stock at $100. Margin req is 50% and maintenance margin is 30%. What price per share would she receive a margin call?

Answer 6

Remember its per share so
Amount borrowed
————————-
1- maintenance

50/.70 = $71.42