What is the minimum credit balance requirement for short sales? - ProProfs Discuss
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What is the minimum credit balance requirement for short sales?

Asked by Brigham, Last updated: Oct 26, 2021

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John Smith

John Smith

John Smith
John Smith

Answered Sep 08, 2016

The minimum credit balance refers to the total value that must be in your account.when you short sell a stock, the result is that the proceeds from the sale are depositedinto your account. these proceeds help to cover part of the minimum credit balance inyour account. any remaining short fall is considered to be margin - you have to makeup that margin from your own pocket.for example, you sell short 100 shares of fed company. the current price of fed is$5 per share and the stock is not eligible for reduced margin. the minimum creditbalance for this transaction is $750. in other words, you must have $750 in youraccount to carry this transaction.when you sell short 100 shares, you receive $500. so this $500 goes into youraccount. however, the minimum balance is $750. that means the margin for thistransaction (i.e., the amount you must contribute out of your own pocket) would be$250 ($750 minimum balance required - $500 proceeds from short sale = $250 marginrequirement).
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