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Non-Tech : Waterhouse Securities

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To: upanddown who wrote (638)	8/1/1998 6:44:00 PM
From: margin_man	Read Replies (1) of 2076

My account contains only non-marginable options and some cash. Only cash can be used as collateral for short sale. Non-marginable options or stocks can't be used as collateral because they don't generate buying power. If I short stock, does the cash have to equal 35% of the total value of the short sale and that amount must remain as collateral the entire time the short is open ? I would use the word "equity" instead of cash. Yes. Your equity must remain 35% or above during the short sale. Otherwise, a margin call will be issued. For example, if you have $10K cash, you could open a short position with a marginable stock up to $20K. In this case your equity is at 50% and your account has no cash. If the security goes up, your equity will be dropping. And vice versa. Keep in mind that your broker could ask you to cover your short position at any time. whether the collateral requirement increases/decreases depending on the current market value of the shorted security. Yes, your equity will increase/decrease depending on the current market value of the shorted security. You will have more buying power if the security goes down. See example above. John, hope this answers your questions. Good luck, Patriot

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