All interest and dividend activity is shown on the Transaction History page.In this post we will talk about the basics of short selling, which is critical to understanding the short ratio and why short squeezes are possible.
Net Interest is the amount of interest received on a cash balance minus any interest paid on a margin loan. Your team will receive a margin call if the Total Equity in your portfolio falls below 30% of the value of your long and short stock positions + mutual fund positions + (.024 x value of treasury bonds) + (.06 x value of municipal bonds) + (.15 x value of corporate bonds).įormula: Minimum Maintenance = 0.30 x ( Value of Stocks + Mutual Funds + | Value of Shorts|) + (.024 x Value of Treasury Bonds) + (.06 x Value of Municipal Bonds) + (.15 x Value of Corporate Bonds.) The Minimum Maintenance is the minimum margin requirement that a team portfolio must maintain after buying on margin. For example, each SMG team begins the game with a Cash Balance of $100,000, but they have an Opening Buying Power of $150,000, accounting for the ability to buy on margin.įormula: Opening Buying Power = Available Equity x 1.5 Opening Buying Power is one and one half Available Equity. On the next business day, the opening buying power will be adjusted to include today's activity. During the trading day, this number will be impacted by any sales or purchases of securities. Opening Buying Power is the total amount of money available for stock, mutual fund, and bond purchases, as well as short sales. Return to Topģ Opening Buying Power, Minimum Maintenance, and Net Interest If this amount is negative, all buy and short sell transactions will be rejected.įormula: Available Equity = Total Equity - Buy Margin Requirement.įor this formula, use the absolute value (positive value) of the Value of Shorts.Įxample: Available Equity = $108,042.59 - + (0.04 x $1,322.52) + (0.10 x $10,539.00) + (0.25 x $0) = $22,136.09. For this formula, use the absolute value (positive value) of the Value of Shorts.Įxample: Buy Margin Requirement = + (0.04 x $1,322.52) + (0.10 x $10,539.00) + (0.25 x $0) = $85,906.50.Īvailable Equity is the amount of equity available for additional buy and short sell transactions. When you buy on margin, you borrow money to invest.įormula: The Buy Margin Requirement = + (.04 x Value of Treasury Bonds) + (.10 x Value of Municipal Bonds) + (.25 x Value of Corporate Bonds). The Buy Margin Requirement is the amount of collateral needed to meet the initial margin requirement when buying on margin. NOTE: These calculations will not appear in Transaction History. This process is called mark-to-market and ensures that the total equity is accurate. The Value of Shorts is updated daily and either added to or subtracted from the Cash Balance. In The Stock Market Game, you can only short sell stocks. When you short sell, you borrow stock from a broker to sell with the hope that its price drops, so you can buy it back at a lower price. It is the amount of money required to short cover the stock and is always displayed as a negative dollar amount. The Value of Shorts is the current value of all stocks held in a short position (i.e., those that were sold short). 2 Value of Shorts, Buy Margin Requirement, and Available Equity
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