Question

The price per share of TSLA today is quoted as follows: Bid: $2, 239.15 Ask: $2, 242.30 with an initial margin requirement of 50%, construct a table to show how far the price of TSLA can rise, before the investor gets a margin call, for the following margin requirements: 25%, 30%, 35%, and 45%. Assume the investor decides to borrow 1, 000 shares of TSLA from the broker.

Answer 1

Trade - Sell TSLA shares

Quantity - 1000 shares

Price - $ 2,239.15 per share ( Bid rate since sell )

Trade value = 2,239.15 × 1000 = $ 2,239,150

Initial margin requirement = 50%

Therefore, Initial margin = 2,239,150 × 50%

= $ 1,119,575

Table showing trigger price for margin call

Maintenance Margin % (A)	Maintenance Margin (B) (Trade value × A )	(Initial margin - Maintenance margin) (C)	Price increase per share to trigger margin call* (C÷ no. of shares)
25%	559,787.50	559,787.5	559.78
30%	671,745.00	447,830	447.83
35%	783,702.50	335,872.5	335.87
45%	1,007,617.50	111,957.5	111.95

*Round down to 2 decimal

Answer :

The price of TSLA share can rise by

$ 559.78 per share if maintenance margin is 25%

$ 447.83 per share if maintenance margin is 30%

$ 335.87 per share if maintenance margin is 35%

$ 111.95 per share if maintenance margin is 45%

before the investor gets a margin call.