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Strategies & Market Trends : Margin Calls - Share The Pain -- Ignore unavailable to you. Want to Upgrade?

To: daffodil who wrote (90)	12/2/2000 9:27:10 PM
From: daffodil	Read Replies (1) \| Respond to of 158

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.