Your client has sold $80,000 worth of ABC stock short. He sold 1,000 shares of ABC at $80 per share. He deposited $40,000 in cash to initiate the position. How high can the share price of ABC go before your client is required to deposit more funds to maintain the position?

Explanations

This is the important formula CR / 1.3. Credit balance divided by 1.3. The credit balance is $120,000. Divided by 1.3, we have $92,307.69. $92,307.69 divided by 1000 shares, we have $92.31 per share. If the stock rises beyond $92.31, the client will have to deposit more funds to maintain the position. CR/1.3