Pump's daily trading recs, emphasis on short selling Message Board

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Strategies & Market Trends : Pump's daily trading recs, emphasis on short selling

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To: Don Pueblo who wrote (3478)	7/8/2001 7:21:02 AM
From: Kirk Messmer	Read Replies (2) of 6873

Shorting Under $5 The Chicken explained this better than I have in several attempts, but he made a technical error. A short trade is made in the margin account, not the cash account, because it is not a cash trade. You're borrowing shares. You need collateral. So the clearing house can seize it and break even when the nightmare "unlimited upside risk" [snicker] occurs. Collateral means margin account. Also, a stock does not have to be marginable to short and $3 is not a limit for shorting. I recently shorted MTNT at 1.64 in a merger arbitrage play (thanks again Michail). The key is whether your broker's clearing house has shares to lend. Also, at the two brokers I've used --one who clears through U.S. Clearing (Fleet) and CSFB who clears through Pershing -- if you short under 5 bucks or if it goes under 5 bucks you still have to maintain $5 per share in account equity. So it ties up capital and borrowing power and under $3 may not be worth it.

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