$5.($Actual numbers are used in this example!$)$ Suppose you sold short $50,000$ shares of GME $($yes$,$ GameStop$)$

on January $26,2021$ at the closing price of $$147\mathrm{.}98$ per share. On January $27$ GME stock closed at

$$347\mathrm{.}51($and was well over $$400$ intraday$).$

a$.$ What would have been the initial value in your trading account on January $26,$ and how much of that

was your margin investment? $$11,098,500$ in account; $$3,699,500$ in equity

b$.$ What is the value of your equity on January $27$ before your margin call? $-$$$6,277,000($that$$s right

$$ negative equity!$)$

c$.$ What is the value of your margin call on January $27?$ $$14,964,750$

d$.$ What is the value of the equity in your trading account after making the margin call? $$8,687,750$

$($which$,$ of course, is $50\%$ of the current value of the stock you owe $$ what you must buy back

to cover your short position$)$

e$.$ This isn$$t a question, rather a cautionary tale about short selling. If you had made the short sale at

the closing price on January $12($instead of January $26)$ you would have sold at $$19\mathrm{.}95$ per share.

And if you were forced to close out your position at the closing price of $$347\mathrm{.}51$ on January $27,$ you

would have lost $$16,876,750$ on your $$498,750$ investment $($initial margin$).$ That$$s a return of

$-3,383\mathrm{.}81\%$ over a $15-$day period. The annualized return $($effective annual rate of return,

EAR$)$ is a NEGATIVE $33,367,510,000,000,000,000,000,000,000,000,000,000\mathrm{.}00\%$ annual

return