Question

A customer is long 400 shares of fully paid XYZ stock, valued at $150 per share. The customer sells "short against the box" another 400 shares of XYZ. XYZ is listed on the New York Stock Exchange. The minimum maintenance margin requirement is:

Answer 1

Answer:

$3,000.

Explanation:

Given that, the margin in an arbitrage account is 5% minimum maintenance on the long side under FINRA rules.

Also, in this case, there is no Regulation T requirement, since the customer has no risk, which means hs net position = "0."

Therefore, given that, the market value of the securities is $150 * 400 = $60,000

Then, the minimum margin which is 5% = $3,000.

Additionally, the customer can borrow the remaining $57,000.

Hence, the right answer is $3,000