Question
As of March 9, 2021, the price of GameStop Corp. (ticker: GME) is $246.90 and its closing price on March 10, 2020 is $4.23. Everyone
As of March 9, 2021, the price of GameStop Corp. (ticker: GME) is $246.90 and its closing price on March 10, 2020 is $4.23. Everyone you know believes GME is overvalued and decides to short-sell GME. You on the other hand decide to be a contrarian with a levered position by buying on margin. You have $131,675 of cash that can be used as margin and your broker requires an initial margin of 80% and a maintenance margin of 71%. Pay special attention that you cannot purchase/sell/trade fractional shares.
How much cushion (in dollars) do you have before you receive a margin call from your broker? That is, by how much the stock price could move in the "wrong" direction before you receive a margin call? Enter a number with two decimal points.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started