Initial margin on short sales of common stock
1) the proceeds from the short sale must be left on deposit, plus
2) a) if the stock is above $5.00 per share,
an additional 50% in cash or SMA
or $5.00 per share, whichever is higher
b) if the stock is less than $5.00 per share
an additional 100% in cash or SMA
or $2.50 per share, whichever is greater.
Examples:
A. Sell short 500 shares @ $40 per share = ($20,000)
RTR = $10,000
$5.00 per share = $2,500
Therefore, $10,000 must be deposited:
Short market value ($20,000)
Deposit proceeds $20,000
Deposit 50% RTR $10,000
_______
Equity = $10,000
B. Sell short 10,000 shares @ $2.00 per share = ($20,000)
Reg T 50% = $10,000
NYSE 100% of market value = $20,000
NYSE $2.50 per share = $25,000
Therefore, $25,000 must be deposited:
Short market value ($20,000)
Deposit proceeds $20,000
Deposit $2.50 per share $25,000
_______
Equity $25,000
Thus, selling short $20,000 of a $2.00 stock requires cash or SMA of $25,000, whereas the same dollar amount of a $40 stock requires only $10,000 cash or SMA.
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