What is the margin requirement when selling stocks short?
When selling stock short, there is a 150% or $5/share (whichever is greater) maintenance requirement for stocks trading for $5/share and higher. For the short investor, this means that he/she must have at least 50% or $5/share of the short sale proceeds available in the account before initiating the short sale. After the stock is sold short, 150% or $5/share of the current market price of the short position must be maintained and reserved in the account. This amount will be adjusted each night in a process referred to as “mark to market”. If the stock declines below $5/share after it is sold short, the requirement is the greater of $2.50/share or 100% of the current market value.