A naughty trader has built up a large share portfolio outside of superannuation using margin lending. He has constantly increased the level of borrowing attached to the portfolio and has borrowed $600,000 on margin with a lending ratio of 60% (which is also the maximum lending level). 

 

QUESTION: Said naughty trader has no other assets other than the portfolio and reveals to his buddy that he is concerned about losing much of the capital in his portfolio.

Describe three ways investors can meet margin calls. In your response include a discussion of which of these strategies naughty boy will most likely employ. 

Answer rating: 100% (QA)

When an investor borrows on margin they have to maintain a minimum level of equity in their portfoli... View the full answer