Short Margin Account Calculations
Chapters in this video
- 0:00 The upside-down world of short selling
- 1:49 Carla's short sale: credit balance and 150% Reg T
- 4:00 Price drop: equity rises when the stock tanks
- 5:15 Price spike: restricted account versus maintenance call
- 6:38 Long versus short face-off: formulas and profit direction
- 7:19 Why short maintenance is 30%, not 25%
- 8:15 Rapid-fire exam recap
What this video covers
- Why a short margin account is the structural mirror of a long account, with credit balance replacing debit balance and short market value replacing long market value
- How the 150% Reg T requirement works at inception: 100% sale proceeds plus 50% customer deposit, with the credit balance locked at exactly 150% of initial short market value
- The fixed nature of the credit balance after inception, and why it never changes even when the stock price moves dramatically
- How to calculate short equity using credit balance minus short market value, and why reversing this formula produces the exam's favorite trap answer
- Why price declines increase short seller equity and price increases erode it, the exact opposite of long account behavior
- The distinction between a restricted account (equity below 50% Reg T) and a maintenance call (equity below 30% of short market value)
- Why short maintenance minimum is 30% rather than 25%: unlimited upside risk means regulators demand a larger equity cushion
Read the full lesson, free
This video's complete written lesson is free to read in the CertFuel app, no signup wall. When you're ready to drill the topic, the full Series 7 course adds adaptive practice questions and spaced-repetition flashcards.