Margin requirement calculation for a short position

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chm

Hi. I'm curious how margin requirement for short positions is calculated.

For example, some stock costs $500 and my account has $10k of cash. If margin requirement is 100%, then I can open a short position of 20 stocks (lets assume that there are no other expenses like margin fees, commission and so on). In some time the price of the stock decreased and now it costs $200. Does it mean that now I can short sell 40 more stocks ($10000 / $200 = 50) without making a deposit to my account (it is still $10k)?
 
I wonder why the brokerage firms give everyone a MarginAcct by default, instead of starting with a CashAcct.
MarginAcct is much complicated and also dangerous to use than a CashAcct.
 
chm said:
Unfortunately, this article does not have an answer to my question.
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Which broker is yours? It should have a so called "Margin Handbook" (or web page) where their formula is documented. Each broker can have a different formula.

Here for example is the Margin Handbook of the brokerage firm TD Ameritrade .

There are 2 margin requirements to meet: the initial margin requirement and the subsequent maintenance margin requirement. Both have their own formulas consisting of 3+ parts (cf. handbook).

And there are 2 flavors of margin accounts: so called "Reg T margin" and "Portfolio margin".
Which type is your margin account?

Here's also a good overview of all the formula...:
https://www.tradestation.com/pricing/options-margin-requirements/
 
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Btw, 100% Margin required means you get no margin relief at all. You are probably thinking 2:1 which is 50% margin.

Do the math. Off the top of your head, preferably. The math of proportions is the most important factor for your success. Not squiggles on a chart or news.
 
earth_imperator said:
There are 2 margin requirements to meet: the initial margin requirement and the subsequent maintenance margin requirement. Both have their own formulas consisting of 3+ parts (cf. handbook).

And there are 2 flavors of margin accounts: so called "Reg T margin" and "Portfolio margin".
Which type is your margin account?
More...
Thanks. I have two accounts. One is Degiro (margin is enabled), second is European IB (no margin yet). We have a different regulations than US and here is no Reg T. However, currently mostly I'm interested in general situations for backtesting using historical quotes.

xandman said:
Btw, 100% Margin required means you get no margin relief at all. You are probably thinking 2:1 which is 50% margin.
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Likely different brokers may treat this value in a different way (especially in different regions like EU-US). For example, on one my accounts (Degiro Trader) it is said that I have 100% margin available. However, they have Investment Portfolio Risk Handbook and actual margin is reduced based on my portfolio. Roughly for stocks it is 70% of portfolio value, for bonds - 80%. For example, if I have $10k in stocks, then I can borrow $7k from them and they call it as 70% margin available.
 
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