Series 7 practice questionmediumMargin Accounts — Short Margin
The minimum maintenance margin requirement for short positions is:
- A25% of the current market value
- B30% of the current market value✓ Correct answer
- C50% of the current market value
- D100% of the current market value
Explanation
Why B — 30% of the current market value
FINRA requires a minimum maintenance margin of 30% for short positions, which is higher than the 25% requirement for long positions. This reflects the theoretically unlimited risk of short selling — if the stock price rises, losses can be unlimited. The 30% requirement provides additional protection for broker-dealers against the higher risk inherent in short positions.
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