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Strategies & Market Trends : Anthony @ Equity Investigations, Dear Anthony,
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To: Louis Riley who wrote (64686)12/19/2000 8:49:08 AM
From: Louis Riley  Read Replies (1) of 122087
 
Some caveats to my previous example:

the 50% initial margin requirement as required by Reg T is just that: an initial margin requirement.

Maintenance margins requirements on a short sale vary by firm ("house" requirement), but I believe may currently not be less than 30% per Reg T. So your invested capital may actually drop to as little as 30% the day after you put the position on once the excess margin is released.

Also, as a short sale is marked to the market in your favor, your maintenance margin required falls.

So it is certainly possible to make more than 200% on a single position if you are able to take advantage of the two situations described above and therefore increase your leverage. But the basic calculation I laid out in the previous post should hold true for most conservative short sellers.
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