Bob is bearish on Barrick Gold, so he decides to sell short 300 shares of the...

 

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Bob is bearish on Barrick Gold, so he decides to sell short 300 shares of the stock. The price of Barrick Gold stock at the time of the short sale is $35. Bob's broker has advised him that the required margin for the deal is 130%. a) What is the initial margin that Bob has to provide for the deal? b) Barrick Gold has now risen to $36 per share. What margin is now required? Does Bob have an excess margin available or must he provide more margin. c) Some time has now passed without movement in the stock. Recent information released by the company has caused the share price to drop to $33. What will be the effect on Bob's required margin? Bob is bearish on Barrick Gold, so he decides to sell short 300 shares of the stock. The price of Barrick Gold stock at the time of the short sale is $35. Bob's broker has advised him that the required margin for the deal is 130%. a) What is the initial margin that Bob has to provide for the deal? b) Barrick Gold has now risen to $36 per share. What margin is now required? Does Bob have an excess margin available or must he provide more margin. c) Some time has now passed without movement in the stock. Recent information released by the company has caused the share price to drop to $33. What will be the effect on Bob's required margin?

Answer rating: 100% (QA)

Lets calculate the required margin at different points in this short sale scenario a Initial Margin ... View the full answer