Question

You bought 100 shares of XLE for $53 using 70% initial margin. if the stock is currently trading for $61, what is your current margin (in percent)? SHOW WORK AND EXPLAIN STEPS PLZ

Answer 1

Initial Margin = No. of Shares * Share Price * Margin Ratio

= 100 * $ 53 * 70%

= $ 3710

Margin acount is daily updated for the difference between price Buy price & current Price

Thus Increased ampount in Margin Account = No. of Shares * [ CUrrent Price - Purchase Price ]

= 100 * [ 61 - 53 ]

= 100 * 8

= 800

Thus Total amount in Margin account = Initial Margin + Change in Margin account

= $ 3710 + $ 800

= $ 4510

% = New Amount in Margin account / Initial Margin account

= $ 4510 / $ 3710

= 1.2156 i.e 121.56%