1

For example, I have an account at IB. The margin requirements are here: https://www.interactivebrokers.com/en/index.php?f=margin&p=stk

Reg T Margin
    IB Initial Margin   25% 1 * Stock Value
    Maintenance Margin  Same as Initial.
    Reg T End of Day Initial Margin 50% 2 * Stock Value
Cash or IRA-Cash    100% * Stock Value
IRA-Reg T Margin    Same as Cash

but that is too cryptic for me. Perhaps someone can help me understand...

I want to be as long as possible on one US stock, but want to protect myself against forced liquidation of position when stock price decrease by as much as x%.

How do I calculate the stock price that might trigger a liquidation of positions?

Day 1:

  • net worth: $100
  • margin loan: $n
  • investment made at time t: $100 + $n

Now stock price goes down by x%.

Day 2:

  • net worth: $100.(1-x%)
  • margin loan: $n
  • investment worth now: ($100 + $n).(1-x%)

I am kind of lost then...

2

Thanks to this youtube video I think I understood the required calculation.

Based on following notation:

x = stock price that will trigger liquidation
n = number of shares
ML = Margin Loan (money owed to broker, assuming you are using margin)
MR = Margin Requirement (as a percentage; like 25% or 50%)

then the formula to find x is:

x = ML / ( n * (1-MR) )

I found afterwards an example on IB site (click on the link 'How to Determine the Last Stock Price Before We Begin to Liquidate the Position') that corroborate the formula above.

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