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$4,000

The initial margin requirement on a short sale depends on the current market value of the stock. For stock selling below $5 per share, the deposit is $2.50 per share or 100% of the market value, whichever is greater. Here the stock is selling at $4. Therefore the required deposit = $4.00 x 1000 shares = $4,000.

The initial margin requirement on a short sale depends on the current market value of the stock. For stock selling below $5 per share, the deposit is $2.50 per share or 100% of the market value, whichever is greater. Here the stock is selling at $4. Therefore the required deposit = $4.00 x 1000 shares = $4,000.