Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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2. As of March 9, 2021, the price of GameStop Corp. (ticker: GME) is $246.90 and its closing price on March 10, 2020 is $4.23. You believe GME is overvalued and decide to short-sell GME. You have $257,550 worth of Treasury Bills in your brokerage account that can be used as collateral. Your broker requires an initial margin of 50% and a maintenance margin of 31%. You must also set aside 100% of the cash proceeds as collateral. You decide to short as many shares as you can with the collateral you have. Pay special attention that you cannot purchase/sell/trade fractional shares.

How much cushion (in dollars) do you have before you receive a margin call from your broker? That is, by how much the stock price could move in the "wrong" direction before you receive a margin call? Enter a number with two decimal points.  

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