Question

You bought 1500 shares of stock at a price of $68 a share. The stock is currently selling for $72 a share. The initial margin was 70 percent and the maintenance margin is 40 percent. What’s your current margin equity?

Answer 1

Given that,

1500 shares are bought at a price of $68

So, portfolio value = shares*price = 68*1500 = $102000

initial margin = 70%

=> Own fund = initial margin*portfolio value = 0.7*102000 = $71400

Currently stock is selling at $72

So total profit = (new price-old price)*shares = (72-68)*1500 = $6000

So, new value of own fund = initial margin + profit = 71400 + 6000 = $77400

New portfolio value = 72*1500 = $108000

So, new equity margin = new own fund/new portfolio value = 77400/108000 = 71.67%

So, current margin equity = 71.67%