I’m not sure if I completely understand the stock drawdown calculation part—so I tried to walkthrough your example in reverse.
Starting with the $350,000 portfolio, you borrow $200,000 and reinvest that amount into the same equity. So when the equity declines by ~18%, you are left with $451,000. Since you still owe $200,000 my understanding is that the maintenance margin calculation would be as follows:
$251,000 / $451,000 = 56% > 15%
Therefore, no margin call occurs.
Since I’m still new to this I’m sure I have a logical blunder embedded somewhere. Could you correct my misunderstanding?
I’m not sure if I completely understand the stock drawdown calculation part—so I tried to walkthrough your example in reverse.
Starting with the $350,000 portfolio, you borrow $200,000 and reinvest that amount into the same equity. So when the equity declines by ~18%, you are left with $451,000. Since you still owe $200,000 my understanding is that the maintenance margin calculation would be as follows:
$251,000 / $451,000 = 56% > 15%
Therefore, no margin call occurs.
Since I’m still new to this I’m sure I have a logical blunder embedded somewhere. Could you correct my misunderstanding?