Mr. Bianchi sold short $20,000 of stock, met the 50% Regulation T requirement, and now carries a credit balance of $30,000. The stock has risen so the short market value is $25,000. Under the FINRA 30% short maintenance requirement, what is the amount of his maintenance call?
- A$1,250
- B$2,500 Correct
- C$5,000
- D$7,500
Why A is wrong: This applies the 25% long maintenance rate to the $25,000 short market value, giving $6,250 required and a $1,250 shortfall. Short positions use the higher 30% rate, not 25%.
Why B is correct: Required equity is 30% of the $25,000 short market value, or $7,500. Current equity is the $30,000 credit minus $25,000, or $5,000, so the call is $7,500 minus $5,000, which is $2,500.
Why C is wrong: This is the current equity, found as the $30,000 credit minus the $25,000 short market value. It is the equity on hand, not the additional deposit the call requires.
Why D is wrong: This is the full 30% maintenance requirement on the $25,000 short market value. The call is only the deficiency below that requirement, not the entire required equity.