As of March 9, 2021, the price of GameStop Corp. (ticker: GME) is $246.90 and its closing price on March10, 2020 is $4.23. You believe GME is overvalued and decide to short-sell GME. You have $156,912 worthof Treasury Bills in your brokerage account that can be used as collateral. Your broker requires an initialmargin of 50% and a maintenance margin of 43%. You must also set aside 100% of the cash proceeds ascollateral. You decide to short as many shares as you can with the collateral you have. Pay special attentionthat you cannot purchase/sell/trade fractional shares.How much cushion (in dollars) do you have before you receive a margin call from your broker? That is, byhow much the stock price could move in the "wrong" direction before you receive a margin call? Enter anumber with two decimal points.

Let us determine the number of shares you shorted using the formula below:

How much cushion (in dollars) do you have before you receive a margin call from your broker? That is, by how much the stock price could move in the "wrong" direction before you receive a margin call? Enter a number with two decimal points.

How much cushion (in dollars) do you have before you receive a margin call from your broker? That is, by how much the stock price could move in the "wrong" direction before you receive a margin call? Enter a number with two decimal points.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

As of March 9, 2021, the price of GameStop Corp. (ticker: GME) is $246.90 and its closing price on March
10, 2020 is $4.23. You believe GME is overvalued and decide to short-sell GME. You have $156,912 worth
of Treasury Bills in your brokerage account that can be used as collateral. Your broker requires an initial
margin of 50% and a maintenance margin of 43%. You must also set aside 100% of the cash proceeds as
collateral. You decide to short as many shares as you can with the collateral you have. Pay special attention
that you cannot purchase/sell/trade fractional shares.
How much cushion (in dollars) do you have before you receive a margin call from your broker? That is, by
how much the stock price could move in the "wrong" direction before you receive a margin call? Enter a
number with two decimal points.

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