You sell 100 shares of PGD short at a price of 50 per share

You sell 100 shares of PGD short at a price of $50 per share. How much is your initial margin, given margin requirements of 40%? If the stock declines to $30 per share, what is your percentage gain or loss on the initial equity?    

Solution

Total value of the investment in stock = 100 Shares X $ 5 0 = $                 5,000.00 Initial margin = 40% Initial margin amount = $ 5,000 X 40% = $                 2,000.00 It means initial equity amount =   $ 2000 Value of the stock is declince from $ 50 to $ 30 it means there is profit = $ 50-$30 = $ 20 Per shares Total Profit = 100 Shares X $ 20 = $                          2,000 % gain or loss on the initial Equity = Profit / Initial Equity % gain or loss on the initial Equity = ( $ 2,000 / $ 2000)*100 % gain or loss on the initial Equity = 100% Answer = Gain on initial equity = 100%