Posted in Finance, Accounting and Economics Terms, Total Reads: 303
Definition: Short Market Value
Short market value is the sum total of the market value of all the short positions taken through an individual’s brokerage account. Short selling involves borrowing the securities from a broker and selling it. After a period of time, the investor must buy back the asset and return it to the broker. Investors who short sell are motivated by the belief that the security’s price will decline, enabling them to buy it at lower price in future and return it to the broker, thereby making profit.
Short market value is calculated by multiplying the security’s market price with the number of shares sold short. It is a negative value as it is the amount that needs to be returned back to the broker in the future. It is used to determine whether the margin requirements of the investor are met for a short sale to take place. If the short market value becomes highly negative, then the investor may have to put additional margin in his account in order to short sell.
For eg. If an investor wants to short sell 10 units of a stock worth $100. So the short market value is negative $1000. If the maintenance margin is 50%, then the investor has to deposit $500 (50% of 1000) in his account for the short selling to take place.