can’t seem to figure this one out…
In the CFAI text on short extension strategy for the 130/30 example it says “for every EUR100 received from the client, the portfolio manager shorts 0.30(100)=30 worth of securities and invests 100+30=130 long-the initial 100 plus 30 provided by short sales proceeds. The costs of a short extension strategy include trade execution costs and stock loan fees paid to brokers lending securities for short sale.”
If the PM shorts, then part of the proceeds are kept by the broker as margin or no? If so, then wouldn’t it be that the PM cannot invest the full 30, so your exposure would not be 130/30. It would be (less than 130)/30.
What am I missing?