Fictitious Credit

DEFINITION of 'Fictitious Credit'

An outstanding balance in a margin account that cannot be withdrawn because it is being used as collateral. Fictitious credit is the result of proceeds from the short sale of securities, and is the opposite of a margin account's free credit balance.

BREAKING DOWN 'Fictitious Credit'

For example, suppose that a short sale of 100 shares of Big Corp. stock is completed at $10 per share, yielding a cash balance of $1,000 in the trading account. The $1,000 is considered fictitious credit and is held as collateral for the 100 shares of Big stock borrowed for the short sale.

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