Answered step-by-stepBilibili Inc (BILI) is an internet gaming company in China. Bear...
Bilibili Inc (BILI) is an internet gaming company in China. Bear Fitchel and his grandson, Bull Fitchel were discussing BILI's stock value. Bear doesn't understand why people like online gaming and so thinks that BILI is overvalued. Bull likes the games they host and thinks the company is going to grow quickly. On November 12th, 2021 Bear short sold 100 shares of BILI and Bull bought 100 shares on margin. On January 21st, 2022 they each closed their positions.
- Assume that the initial margin requirement is 0.50 and the maintenance margin requirement is 0.25.
- You may ignore the rebate and any fees for borrowing the stock
- Assume all trading occurred at the adjusted close price posted on finance.yahoo.com
- What is the minimum amount of cash that Bear and Bull each had to have deposited in their account to make the trade?
- At what price would Bear and Bull get a margin call?
- Did either Bear or Bull get a margin call? If so, on which day?
- Please draw both Bear's and Bull's payoff and profit diagrams.
- What was Bear's profit and Bull's profit when they closed their positions?
Answer & Explanation
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