Credit Balance
Definition of 'Credit Balance'In a margin account, the amount of funds deposited in the customer's account following the successful execution of a short sale order. The credit balance amount includes both the proceeds of the short sale itself and the specified margin amount the customer is required to deposit under Regulation T. |
|
Investopedia explains 'Credit Balance'In the case of a short sale, an investor essentially borrows equity shares from his or her brokerage and then sells the shares on the open market, hoping to buy them back off the open market for a lower price at a later date and then return them to the brokerage, pocketing the excess cash left over.When the shares are first short sold, the investor receives the cash amount of the sale in his or her margin account. This amount, plus the specified margin amount which must be deposited by the investor under Reg T, comprises the credit balance. It must be maintained in the investor's margin account as a form of assurance that the shares can be repurchased from the market and returned to the brokerage house. |
Related Definitions
Articles Of Interest
-
Should You Close Your Credit Card?
Find out the consequences before deciding to end your credit agreement. -
How can you lose more money than you invest shorting a stock? If you have no money left in your account, how do you pay it back?
The simple answer to this question is that there is no limit to the amount of money you can lose in a short sale. This means that you can lose more than the original amount you received at the ... -
Why do you need a margin account to short sell stocks?
The reason that margin accounts and only margin accounts can be used to short sell stocks has to do with Regulation T, a rule instituted by the Federal Reserve Board. This rule is motivated by ... -
Margin Trading
Find out what margin is, how margin calls work, the advantages of leverage and why using margin can be risky. -
Short Selling Tutorial
Want to profit on declining stocks? This trading strategy does just that. -
When To Short A Stock
Learn how to make money off failing shares. -
Top 4 Most Scandalous Insider Trading Debacles
Here we look at some of the landmark incidents of insider trading. -
How Leverage Is Used In Forex Trading
Forex trading by retail investors has grown by leaps and bounds in recent years, thanks to the proliferation of online trading platforms and the availability of cheap credit. The use of leverage ... -
What Is Spread Betting?
The temptation and perils of being over leveraged is a major pitfall of spread betting. However, the low capital outlay necessary, risk management tools available and tax benefits make spread ... -
The Short Squeeze Method
The short squeezed strategy can be risky - but also very rewarding - for those who master it.
Free Annual Reports