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Let's say the margin requirement for a stock XYZ is 50%. The current price of XYZ is $150/share. Let us say I put in $100, and borrow $50 from the broker to buy a share.
Typically, how far can the stock drop before I get a margin call?
Is it $75 (50% of $150)? Or is there more to it?
With your numbers, look at it this way - You borrowed $50. When the stock is $100, you are at 50% margin.
What's most important, is that there's margin interest charged, so the amount owed will increase regardless of the stock price. When calculating your return or loss, the interest has to be accounted for or your numbers will be wrong. For a small investor, margin rates can run high, and often, will offset much of your potential gain. What good is a $100 gain if you paid $125 in margin interest?
