Week 8 Session: Short Selling, Margin and Leverage

A risk-analysis session: taking this week’s margin and leverage arithmetic and running it against a position until it actually breaks.

What you’re given#

A simulated leveraged long position and a simulated short position, each with a stated own-money amount, borrowed amount and maintenance-margin percentage.

What you do#

For the long position, calculate the margin requirement and work out the price move that triggers a margin call. For the short position, calculate how the loss grows as the price rises and compare its shape to the long position’s capped downside. State, for both, exactly what closes the position and when.

What you produce#

Worked margin and margin-call calculations for both positions, plus a short written comparison of why the short’s loss profile looks different from the long’s.

Why it matters#

This arithmetic is reused, not retaught, when Futures and Options apply margin to derivatives instead of stocks — Week 9 assumes you can already do this by hand.