I came across this situation and thought of sharing it with you. The question is, is it possible to get a margin call with a constantly increasing portfolio? It turns out that the answer is yes. Here is an example. Suppose I have $3500 in my account. According to margin rules, I can use up to 3500*2.5=8750 buying power. So, I short 100 shares of ABC at $46 a share with a total of $4600, and buy 100 shares XYZ long at $33 a share with a total of $3300. Notice, that I still have $8750-4600-3300=$850 buying power left for safety. Now, suppose ABC goes up $1 every day for 10 days, and XYZ goes up $1.20 every day for the same 10 days. So, my portfolio will be increasing at a rate of (1.20-1)*100=$20 per day. At the end of the 10th day, it will have 100 shares of ABC short at $56 a share with a total of $5600, and 100 shares of XYZ at $45 a share with total of $4500. Since $5600+4500=10100, it will require a concentrated maintenance of 10100/2.5=4040, but the value of my account will be 3500+10*20=3700 which is $340 short of the maintenance requirement. This means that I will get a margin call before the end of the 10th day.
A weird, but interesting phenomenon.

Problem #1:  The initial margin requirement under Reg T for equities is 50%.  Therefore, the initial margin requirement for a short sale of $4600 is $2300.  The margin for your $3300 purchase is $1650.  The total is $3950.  You have $3500 and a margin call headed your way. 

A shorted stock where the price is going up is not a "constantly increasing portfolio" imo...

Your 100 short shares of ABC means you are 1000 in the hole from your position.  Since you do not OWN 100 shares of equity in company ABC you cant multiple 100 * 56 to get an equity position of 5600 dollars.

You're not in the hole. You owe 100 shares but the cash is put in your account (although cordoned off until you cover.)

Oops, i think I misread your post.

Uncle Billy:

Problem #1:  The initial margin requirement under Reg T for equities is 50%.  Therefore, the initial margin requirement for a short sale of $4600 is $2300.  The margin for your $3300 purchase is $1650.  The total is $3950.  You have $3500 and a margin call headed your way. 

I believe it is 40%, but I cannot point to a specific paper that says so. If you can point to the proper regulation that explicitly states the 50% requirement, I will adjust my example. Anyway, that is not the point and the example still works even if I stated that I had $4000 in my account initially (and even if the requirement is 50% with a little adjustment). The example was to demonstrate that although it looks like a pretty safe thing to do when you are not sure which way the market is headed one should be careful on the margin at all times. When one has to maintain minimums on both short and long positions, the more expensive the positions grow, the more maintenance is required. The example shows, that even the pair of stocks grows in my favor, I still will encounter the maintenance problems.

Solution to Problem #1:  Go to Google.  Type "Reg T margin requirements".  You will get a few hundred results confirming the 50% requirement.  It has been 50% for many years.

Now on to Problem #2:  The stock you have shorted is now $56.  The long position is now $45.  Your net liq is now $4000 less 1000 plus 1200 which equals $4200.  Now lets examine your margin requirement.  Since you have a concentrated position you will be maintenanced at 40%.  (5600 + 4500) x 40% = $4040.  Since your net liq of $4200 is greater than the margin requirement of $4040 there is no margin call.  However it is conceivable that such a thing could happen.

Bear in mind that this will likely only come into play when your margin requirement is increased due to concentration, special requirements for specific stocks, or a general increase in margin requirements by the particular firm involved.  In the past firms seemed to be concerned with the concentration issue only when the underlying securities were extremely volatile.  Years ago I had a $600,000 debit against one stock that was margined at 50%.  They called and said they had a problem with it.  I told them I would be happy to pay down the debit to their comfort level and then assist them further by moving the account elsewhere.  They decided that their comfort level would not be a problem.

koreiko:

The example shows, that even the pair of stocks grows in my favor, I still will encounter the maintenance problems.

A short sold stock only "grows" in your favor by going down in price.  In your example your shorted stock went up in price which is not favorable for the equity in the example.

But I think I understand what you are saying.  The margin call was in effect because the increasing ratio amount wasnt high enough to satisfy your margin call percent.  You would need to increase 1.50 on that equity stock to satsify say an increase in 1 dollar of your shorted stock.

My apologies for not reading your original example clear enough

Thank you Uncle Billy. You just helped me learn that the initial purchase requirements and the (concentrated) maintaenance requirements on a margin account are not the same. According to SEC website http://www.sec.gov/ the former is 50% and the latter is 25% with allowing brokers have a bigger % concentrated maintenance requirements (zecco has 40%, this is what I was using). What this means is that you cannot buy on margin unless you have the half of the money of what you want to buy (or sell). But once you purchase (or sell), SEC requires you to keep 25% of your net in your account at all times. Zecco has the concentrated maintenance requirement at 40%.

As for my example, here is how I will change my numbers. I will start with $4500 initial money (instead of $3500) to satisfy the REG T requirement. And again, short 100 shares of ABC at $46 a share with a total of $4600, and buy 100 shares XYZ long at $33 a share with a total of $3300 (nothing changed here). As Uncle Billy pointed out above, $3950 REG T requirement will be satisfied since I have $4500 in my account. Now, instead of using $1 on short and $1.20 on long for daily increase, I will suppose ABC grows $2 per day and XYZ grows $2.20 per day for the same 10 days (I could use the same numbers before but for 20 days instead of 10). In other words, my portfolio grows at a rate of (2.20-2)*100=$20 per day. At the end of the 10th day, the position in ABC will be 66*100=6600 in short, and XYZ will be 55*100=5500 in long, with a total of 6600+5500=12100. The concentrated maintenance will require 12100*40%=4840, but my account will have $4500+200=$4700. Which means that I should get a margin call before the end of the tehth day.

Here's another piece of information that you and others may find useful.  Suppose you wanted to know what the maintenance margin at Zecco is.  We already know that the regulatory requirement is 25% but we want to make sure that the Zecco requirement is the same.

So we wade through the Zecco website where information is very hard to find, and we get to the Zecco Trading Reference, FAQ, Margin Information section. And we read the page and we get to the part where it says What are the initial and maintenance margin requirements for listed    securities at Zecco Trading?  And it tells us that the maintenence requirement is "$5 per share or 25% of market value, whichever is greater."  Question answered, no problem.

But is there more?  Should we read on?  Further down the page we have the following:

 

Who sets margin requirements?

By the way, the link to the SEC page http://www.sec.gov/ that I submitted above is a very short and clear explanation (with examples) on pretty much all the rules and regulations of margin trading. So, I would recommend zecco to place a link to that page somewhere visible so that people will read and get the answers to so many questions they have.