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You have just shorted 1000 shares of stock ABC at price of $50 per share. The initial margin requirement is 50% with the maintenance margin
You have just shorted 1000 shares of stock ABC at price of $50 per share. The initial margin requirement is 50% with the maintenance margin requirement equal to 30%> Assume that the stock pays no dividends.
1. What is the initial amount of cash you must put up as collateral?
2. How far can the stock price go up before you receive a margin call?
3. Suppose you decide to buy back the shares immediately if the price hits $55. What order can you use to achieve this?
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