| Title: | Market Investing |
| Moderator: | 2155::michaud |
| Created: | Thu Jan 23 1992 |
| Last Modified: | Thu Jun 05 1997 |
| Last Successful Update: | Fri Jun 06 1997 |
| Number of topics: | 1060 |
| Total number of notes: | 10477 |
Question: How do most brokerage firms handle shorting on margin?
If I short some stock using my long positions in other stocks to support the
short. What interest fees are charged?
Scenerio 1:
Since stock is supporting the short, I am charged nothing.
Scenerio 2:
The brokerage firm loans me 50% of the price of the short to support
the margin requirement, and charges me interest on that loan.
Scenerio 3:
The brokerage firm loans me 100% of the price of the short, and charges
me interest on that loan.
In all cases, the short account is marked to the market at the end of the
trading day.
Increases in the price of the shorted stock cause the margin debt to
increase. Decreases in the price of the shorted stock cause the margin
debt to decrease.
Regards,
Randy Skelding
| T.R | Title | User | Personal Name | Date | Lines |
|---|---|---|---|---|---|
| 225.1 | SDSVAX::SWEENEY | Patrick Sweeney in New York | Fri Jun 19 1992 16:43 | 7 | |
You left out on important thing, a margin call.
When a stock is shorted on margin, you are exposed to a potential margin
call when the stock increases in price.
You will be asked to increase your margin cash to the minimum or your
position will be sold out to meet the margin call.
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| 225.2 | dividends on shorted stock | VSSCAD::SIGEL | Fri Jun 19 1992 20:09 | 6 | |
When you short a stock, aren't you also responsible for paying the dividends on the stock for as long as you've shorted it? Since you have been lent stock that you eventually must pay back, I believe you have to supply the income that the stock would provide the lender. Andrew | |||||
| 225.3 | one answer back already | PAMSRC::SKELDING | Fri Jun 19 1992 20:23 | 9 | |
>Scenerio 1: > Since stock is supporting the short, I am charged nothing. I got mail from one of the regulars in the trading notes file, that indicated that his brokerage firm, Schwab, does not charge interest on the short. If all brokerage firms work the same way, then Scenerio 1 is what I should expect. | |||||
| 225.4 | dividends | VIZUAL::FINNERTY | The bug stops here | Fri Jun 19 1992 20:52 | 5 |
re: .2 aren't you required to pay the dividends?
yes.
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