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1. Short selling can be dangerous. Here is an example for discussion from the GameStop debacle. Let's pretend we had gone short 100,000 shares of
1. Short selling can be dangerous. Here is an example for discussion from the GameStop debacle. Let's pretend we had gone short 100,000 shares of GME at 100. Assuming we had to add another 5 million in margin. We would start with assets of 15m, liabilities of 10 million, and equity of 5 million. Lets also assume that we have a maintenance margin of 30%. When GME went up to 150, how much money would we have lost and how much would we need to infuse with cash in order to maintain the position. Let's say we infuse the necessary cash. Then GME goes to 250. How much would we have lost total from 100 to 250. When we moved from 150 to 250, how much of a cash infusion would we need to hold the position
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