Question

Suppose the broker requires 150% market value for short selling and a client wants to short sell 500 shares of Microsoft stocks at $100 per share. How much does the client needs to put in the margin account? If Microsoft stock price increases to $166, how much margin call will the client get?

Answer 1

Short sale no. of shares 500
Price per share 100
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So, market value = 500 *100 = 50000
      
150℅ of 50,000 =        75000
      
So, Margin amount required to be put by client = $75,000     
      
Price increased to $166
      
Shares are short sold, so if price increased margin call will be made      
      
"Now, market value of shares = 500 *166= 83000
      
Margin required to be maintained at 150℅ of $83000. =. 124500
Less: initial margin amount        -75000
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Margin call 49500
      
So, client will get margin call of $49,500