Posted by forex at 4:32 AM
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1. Convert the percentage margin and maintenance margin requirements to their decimal equivalents by dividing each by 100. For example, a margin requirement of 50 percent is 50/100 = 0.50. If the maintenance margin is 25 percent, this equals 0.25.
2. Multiply the purchase price of the security by 1.00 minus the margin requirement. For a stock purchased at $40 per share and a margin requirement of 0.50 you have $40(1.00 minus 0.50) =$20.00. This is the amount per share you borrowed from your broker.
3. Divide the amount you borrowed from your broker by 1.00 minus the maintenance margin required. If you borrowed $20 per share and the maintenance margin is 0.25, you have $20 (1.00 minus 0.25) =$26.67. If the stock price falls below $26.67 per share you will get a margin call.