Short Margin Maintenance Call Trigger Formula (Credit ÷ 1.30)
An investor establishes a short position and has a total Credit Balance of $26,000. At what Short Market Value (SMV) will the account receive a minimum maintenance call?
To find the market value at which a short account triggers a maintenance call: SMV = Credit Balance ÷ 1.30. $26,000 ÷ 1.30 = $20,000.
Complete Analysis & Legal Rationale
At an SMV of $20,000 with a Credit of $26,000, Equity is $6,000 ($26,000 - $20,000). $6,000 is exactly 30% of $20,000. If SMV rises above $20,000, equity drops below 30%, triggering a call.
Mathematical Step-by-Step Derivation
- Step 1: Formula: Critical SMV = Credit Balance ÷ 1.30
- Step 2: $26,000 ÷ 1.30 = $20,000.
- Step 3: Verification: $26,000 - $20,000 = $6,000 (which is 30% of $20,000).
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
$26,000 ÷ 1.30 = $20,000 exact short maintenance trigger.
Multiplies by 0.70 instead of dividing by 1.30.
Divides by 1.15.
Divides by 1.50.
Official Standard: Mathematical threshold formula for short maintenance calls.