Do you allow for multiple accounts to trade "boxed" issues? Yes.
I think I can help with this question. Sometimes a daytrader will open two cross margined accounts for his/her trading. In one account, he will open long positions in several stocks (example: Long 1000 shares of DELL, INTC, MSFT). In the other account, he will initiate short positions in the same stocks (i.e. Short 1000 shares of DELL, INTC, MSFT). He now has three 'boxed' positions and his net exposure is zero.
The purpose of this maneuver? When the market begins to drop like a rock, the trader can now easily initiate a net short position by selling stock in his long account. Note that long stock can be sold on both upticks and downticks, but a short position can only be initiated on an uptick or at a price of at least 1/16 above the inside bid price.
To my knowledge, this is the entire benefit of a 'boxed' position. ==> To enable a trader to effectively short a stock that is dropping quickly, without waiting for an uptick. Also, I believe that the margin requirement for maintaining a 'boxed' position is only ~5% of the value of the combined position (?).
According to some, this practice is illegal...if it is used to circumvent the uptick rule or to "accumulate a position." |
