Mr. Handsome is interested in the UGLY stock. He finds that the price should be $3, but the market price is $5 per share now. Mr. Handsome has $2,000 in his margin account. The initial margin requirement is 40%, and the maintenance margin is 30%. Assume there are no interests and service charges. Mr. Handsome covers his short position at $4 and deposits all proceeds to his margin account. But he still thinks the price will decrease to $3. So he short again as many shares as possible. After this transaction, Company UGLY
Mr. Handsome is interested in the UGLY stock. He finds that the price should be $3, but the market price is $5 per share now. Mr. Handsome has $2,000 in his margin account. The initial margin requirement is 40%, and the maintenance margin is 30%. Assume there are no interests and service charges.
Mr. Handsome covers his short position at $4 and deposits all proceeds to his margin account. But he still thinks the price will decrease to $3. So he short again as many shares as possible. After this transaction, Company UGLY receives a great donation. So its stock price increases to $5. Mr. Handsome has to cover his short position. Then how much is left in his margin account? More than or less than his initial funds? Can you provide any intuition for your answer?
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