General Securities Sales Supervisor (Series10) Practice Exam

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What is the minimum maintenance margin requirement for a short stock position valued at $10 per share?

  1. A $2.50 per share

  2. B $3.00 per share

  3. C $5.00 per share

  4. D $10.00 per share

The correct answer is: C $5.00 per share

The minimum maintenance margin requirement for a short stock position is typically set at 30% of the current market value of the short position. In this case, if the stock is valued at $10 per share, the maintenance margin requirement would be calculated as 30% of $10, which equals $3 per share. However, in the context of margin accounts, there is a minimum set by regulation that can affect short positions. This not only encompasses the percentage but also places a floor amount typically known as the minimum maintenance margin requirement. For many broker-dealers and under FINRA rules, this minimum is often $5 per share when dealing with short sales. Therefore, since the calculated maintenance margin of $3 does not meet the firm minimum requirement, the correct response considers this broader minimum, which is $5 per share. The value of $5 per share reflects the regulatory standards that help to manage risk for both the broker and the trader, as short selling can lead to potentially unlimited losses. Thus, ensuring that there is sufficient collateral to cover those risks is crucial for maintaining the integrity of the margin system.

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