Example 3.4 Margin Calls on Short Positions Suppose the broker has a maintenance margin of 30% on short sales. This means the equity in your account must be at least 30% of the value of your short position at all times. How much can the price of Dot Bomb stock rise before you get a margin call? Let P be the price of Dot Bomb stock. Then the value of the shares you must pay back is 1,000P and the equity in your account is $150,000 - 1.000P. Your short position margin ratio is Equity/Value of stock = (150,000 - 1.000P)/1,000P. The critical value of P is thus Equity 150,000 - 1.000P = .3 Value of shares owed 1,000P