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Series 7 practice questionhardMargin Accounts — Short Selling Margin

A customer wants to sell short 500 shares of ABC stock currently trading at $60 per share in a margin account. What is the minimum initial deposit required under Regulation T?

  1. A$7,500
  2. B$15,000✓ Correct answer
  3. C$30,000
  4. D$60,000
Explanation

Why B — $15,000

Short selling requires a margin account and is subject to Regulation T's 50% initial margin requirement. The total market value of the short sale is $30,000 (500 shares x $60). The customer must deposit 50% of this amount, which is $15,000, as the initial margin requirement. The proceeds of the short sale ($30,000) remain in the account as collateral, and the total credit balance in the account would be $45,000 ($30,000 proceeds + $15,000 margin deposit).

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