The end result is the same, but the logic is slightly different. You have an exposure of $2M and only $1M in your account. So you have to borrow an additional $1M on margin to cover that exposure.
Both wrong. In this scenario, no cash is borrowed. The 1M cash perfectly pays for the 1M of longs. Only longs can create cash borrows, when you are long more than your cash. Shorts create stock borrows instead. You pay short interest based on the stock borrow/lend market, but you actually can receive interest from the cash proceeds if the fed funds rate is positive, and depending on your broker. Gross exposure does not need to be covered by cash. Mechanically, shorting does not require cash, and it is only constrained by regulations and/or broker risk limits (reg T, PM, house requirements).
So you have to have at least $500k in your account if you want to sell short $1M in stock in a regular margin account. And if you have less than $1M in your account, anything between $500k and $1M is considered a margin loan. You can't take an account with $1 in it and sell $1M in stock short because "shorting doesn't require cash"!
Correct assuming Reg T (2:1 maximum leverage overnight). This is just not how it works. Putting on a short position doesn't involve putting up any cash and will never create a margin loan. You just need enough positive value in the account so that the overall position fits within the allowed parameters (leverage, etc.) This could be in the form of cash or it could be in stock, options, whatever instruments that the regulations allow for cross margining.
You're saying you could sell $1M short with $1 in your account then. Which obviously isn't the case, you have to collateralize your short sale. Give it a try right now, try to sell more securities short in your account than you have cash and see if it creates a margin position.
Cruise control never implied that statement. He made it explicitly clear that there is a collateral requirement for the short sale The collateral requirement exists in case the short sale goes against you and is marked to market . There are regulatory requirements to the amount of collateral.
Not what I said at all... My point was 1) the collateral doesn't need to be cash and 2) it has nothing to do with margin loans. How about you give it a try right now? I've been trading equity L/S since 2014 and I can tell you this works just fine with no margin loan.