Question

The Federal Reserve System and the New York Stock Exchange regulations currently require the short seller to have an initial margin of at least _______ of the price of the stock: 10% 25% 30% 50%

Answer 1

Answer:

Correct answer is 50%

Explanation:

The appropriate response is half.  

The Regulation T of the Federal Reserve Board requires the equalization for all short deal records to be at any rate 150% of the estimation of the protections at the time the deal is started.  

This implies when the short deal is started, as we are selling the offers first, our record will have the 100% estimation of the offers sold (as we receipts of cash from selling) in addition to an extra edge prerequisite of half of the estimation of the short deal.  

For instance, on the off chance that I am short selling an offer whose cost is $100, at that point when I short sell the offer, my record equalization will become $100, as receipts of the deal.  

Along these lines, at the hour of inception of offer, my record equalization ought to be 150% of the estimation of short deal = 150% of $100 = $150. The separation of this sum is  

100% of $100 = $100, which gets credited to my record  

in addition half of $100 = $50, which is the edge necessity at the inception of short deal.  

In this way, Initial edge necessity is atleast half of the cost of the stock.  

The student ought not befuddle the underlying edge necessity with the base upkeep edge.  

The base support edge required to be kept up is 25%. This implies the short dealer ought to consistently have an edge (not balance) of 25% in the record. In the event that the edge goes beneath 25%, at that point the edge require the distinction sum is actuated, which the short dealer is required to pay to keep on keeping her situation in the market unaltered.  

Be that as it may, beginning edge required to be kept up is half.