Question: 1. Suppose that Walmart is trading at $50 a share and you believe that it is overpriced. Thus, you decide to short 100 shares of Walmart. Your broker also requires you to post an initial 50% margin. What does your balance sheet look like?
2. What happens if Walmart declines to $30 and you liquidate your position? What if Walmart stock increases in price to $70 instead?
3. Suppose that your broker requires a minimum maintenance margin of 25%. How far can Walmart stock rise before you get a margin call?