This problem illustrates the risk of short sale using the GameStop story. Before the January...
80.2K
Verified Solution
Link Copied!
Question
Accounting
This problem illustrates the risk of short sale using the GameStop story. Before the January frenzy, the GameStop stock was trading under $ on the market while the company itself was on the brink of filing for bankruptcy. Suppose you short sold shares of GameStop at $ believing it would be worthless soon. Your broker requires an initial margin of Answer: What does your balance sheetTaccount look like after this transaction? If the maintenance margin is at what share price will you receive a margin call? If GameStop had indeed gone broke and you covered your short position at $ per share, what would your return have been ignoring transaction costs including interest expenses We know what really happened: on January GameStop was still trading at $ next day, the price rose to $ and continued climbing steadily in the following days. In two weeks, GameStop reached $ on January Suppose you had covered your short position at $ per share, what would your loss have been ignoring all expenses
This problem illustrates the risk of short sale using the GameStop story. Before the January frenzy, the GameStop stock was trading under $ on the market while the company itself was on the brink of filing for bankruptcy. Suppose you short sold shares of GameStop at $ believing it would be worthless soon. Your broker requires an initial margin of
Answer: What does your balance sheetTaccount look like after this transaction?
If the maintenance margin is at what share price will you receive a margin call?
If GameStop had indeed gone broke and you covered your short position at $ per share, what would your return have been ignoring transaction costs including interest expenses
We know what really happened: on January GameStop was still trading at $ next day, the price rose to $ and continued climbing steadily in the following days. In two weeks, GameStop reached $ on January Suppose you had covered your short position at $ per share, what would your loss have been ignoring all expenses
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
- Unlimited Question Access with detailed Answers
- Zin AI - 3 Million Words
- 10 Dall-E 3 Images
- 20 Plot Generations
- Conversation with Dialogue Memory
- No Ads, Ever!
- Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Other questions asked by students
StudyZin's Question Purchase
1 Answer
$0.99
(Save $1 )
One time Pay
- No Ads
- Answer to 1 Question
- Get free Zin AI - 50 Thousand Words per Month
Best
Unlimited
$4.99*
(Save $5 )
Billed Monthly
- No Ads
- Answers to Unlimited Questions
- Get free Zin AI - 3 Million Words per Month
*First month only
Free
$0
- Get this answer for free!
- Sign up now to unlock the answer instantly
You can see the logs in the Dashboard.