Short Selling
You are bearish on GE because of the global economic slowdown and expect a sharp drop in its share price. So you short 1,000 shares of GE at $20 per share.
A) If the initial margin requirement is 55%, how much additional collateral do you need to post? What is the total collateral in your account?
B) If the maintenance margin is 35%, how high can GE share price rise to before you get a margin call? (For this part, ignore GE’s dividends.)