Margin Calculation Intraday - Example

Long Shares 100

Price per share 800
Initial margin 40%
Market Value of transaction at t=0 80,000.00
Amount Borowed 48,000.00
Investor's equity 32,000.00

a) If Maintenance margin is 20% ; below what price will the investor get margin call?
Maintenance Margin 20%
Threshold price for Magin Call P = 600

for unknown P

b) Calculate change in investor's equity if position is squared off at Rs 700

Brokerage 75bps on Ist leg of transaction
Interest cost is 4% of the borrowed amount

Square off price 700

Investor's margin 31.43% still no margin call
minimum margin level required 20%

Investor's Equity at t=1 (excluding trading costs) 22,000.00

Brokerage and Commission 600.00
Interest cost 1,920.00
Ending investor's equity (@t=1) 19,480.00
Beginning Investor equity 32,000.00
Return on Investment -39.13%

%age fall in Price -0.125

Leverage factor 2.50
If no brokerage and interest cost then ROI -31.25% check it by substituting zero for brokerage and interest
 %Margin = (Inv Equity/Market Value of Stock)
Investor's Equity = Market Value of Stock - Borrowed Amount
0.2 = (P*100-48000)/(P*100) 600.00

substituting zero for brokerage and interest

 We assume that as per terms and conditions, whenever
an investor receives a margin call the investor has to
deposit cash so that the investor's % margin is equal to
Assumption the initial margin requirement

Position Short Sell

Number of Stocks 1500

Price 250
Initial Margin requirement 40%
Maintenance Margin 20%

a Cash Inflow at t=0 from shorting 375,000.00

b Additional Amount to be deposited 150,000.00 525,000.00
Investor's Equity `=a + b - Value of Shares owed
% margin Investor's Equity/Value of Shares owed
40.00% check

if Price at t=1 225 favorable for short seller

% margin increases to 55.56% no margin call

Leverage factor 2.50

% change in stock price (0.10) since it’s a short position, drop in sto
Return on Investment (RoI) 25.00%
Check RoI calculation
Short covering at t=1 (@Rs 225) 337,500.00 Cash Outflow (buyback 1500 shares a
Return on short sale `= (Value of Short Sale-Value of repurchase)/Initial M
25.00%

if Price at t=1 300

% margin 16.67% investors gets margin call

Additional Amount to be invested % margin = (Investor's Equity/Value o

0.5 = (375000+150000-300*1500+X)
X 150,000.00

% equity after depositing additional margin amount 50.00% (Pl rectify it is 40%)

Calculate RoI if the position is squared off at Rs 350

Position squared off at t=1 (Buy back) 525,000.00
Value of shares at t=0 375,000.00
Initial margin paid 150,000.00
RoI -100.00%
We will not consider additional margin deposits for RoI calculation
Also, any brokerage etc must be considered for RoI calc.
 Total value in margin account
Shares owed
/Value of Shares owed

avorable for short seller

no margin call Please note the excess amount (>initial margin) can be withdrawn

since it’s a short position, drop in stock price will benefit the trader

Cash Outflow (buyback 1500 shares at Rs 225 per share)

t Sale-Value of repurchase)/Initial Margin Deposited
[Margin deposited is the investment done by the investor and therefore considered as base]

nvestors gets margin call

% margin = (Investor's Equity/Value of Shares Owed)

0.5 = (375000+150000-300*1500+X)/Value of shares owed I have erroneously calculated X considering 50% initial margin; it is 40%
(please note: if the margin requirement by broker is to top-up the account only till maintenance margin, in that case replace 0.

Pl rectify it is 40%)

Check
Leverage factor 2.5
Change in price 40.00%
Loss 100%
tial margin; it is 40%
n, in that case replace 0.5 by 0.2 in the above calc.)