Walmart stock rise before you get margin call

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Reference no: EM131311551

Short Selling Suppose that Walmart is trading at $500 a share and you believe that it is overpriced. Thus, you decide to short 1000 shares of Walmart. Your broker also requires you to post an initial 50% margin.

1. What does your balance sheet look like?

2. What happens if Walmart declines to $300 and you liquidate your position? What if Walmart stock increases in price to $700 instead?

3. Suppose that your broker requires a minimum maintenance margin of 65%. How far can Walmart stock rise before you get a margin call?

Reference no: EM131311551

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