Hedge Fund Short Selling Margin Calculation: FTSE 100 Example

7.a. To calculate the initial margin required, we need to multiply the number of shares short sold by the price per share and then multiply that by the margin requirement.

Initial Margin Required = (Number of shares short sold) * (Price per share) * (Margin requirement)

Initial Margin Required = 100,000 * ﾣ4.50 * 105% = ﾣ472,500

Therefore, the initial margin required to satisfy this trade for execution is ﾣ472,500.

7.b. To calculate the additional margin required, we need to calculate the difference in the value of the short position after the shares have risen and multiply it by the margin requirement.

Additional Margin Required = (Number of shares short sold) * (Change in price per share) * (Margin requirement)

Change in price per share = ﾣ5.00 - ﾣ4.50 = ﾣ0.50

Additional Margin Required = 100,000 * ﾣ0.50 * 105% = ﾣ52,500

Therefore, the additional margin that needs to be posted if the shares rise to ﾣ5.00 by the close is ﾣ52,500.