00:01
So here we have a person who is shorting going to short, sorry, no, we're going to short 100 at $50 to six share.
00:09
So our plan is to short 100 shares at $50, right? so this has a what a finance person might say a notional value of 100 shares, $50 each, is equal to $5 ,000, right? so when this happens, you will get $500 cash, $5 ,000 cash, but you will be short that amount, right? so you will get that cash immediately, right? but you have an obligation to buy shares in the future, right, to buy in future.
00:53
So at 50, right, at 50 % margin, you need 50 % times 5 ,000 is equal to 200, 2 ,500 on sort of reserve, right? so you will need to have 2 ,500 in your brokerage account.
01:17
Or another way of saying that is that you can only cash out $2 ,500 when you sell this security short and get 500.
01:25
You will need to keep 2 ,500 on reserve to satisfy the margin requirement.
01:31
So b, let's suppose that the margin requirement is now 30 % on a continuing basis.
01:42
So what we want to think about is at what point we're going to face a margin call, right? so we will get a margin call if our requirement is insufficient...