Zitel-ZITL What's Happening Message Board

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Technology Stocks : Zitel-ZITL What's Happening

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To: Mama Bear who wrote (18038)	9/22/1999 11:05:00 AM
From: Daniel Chisholm	Read Replies (2) of 18263

Barb, thanks for the explanation, it makes sense. It is essentially the same as the way the accounting and margining is done at the Canadian brokerages I am familiar with (just about the only difference is that the identification of subaccounts uses different numbers or letters than you have indicated ;-). A lot of the "explanations" I've read about how margining is done at US brokerages just doesn't seem to ring true. From your explanation though, it sounds like there is an opportunity cost of $5 per share of "frozen capital" in order to stay short a low-price stock. So even though you can earn (say) 4% on this frozen capital, it is not yours to do with as you please (e.g., withdraw it, invest it otherwise), and if you are able to generate substantially more than a 4% ROE on your trading capital it may very well be worth your while to cover, pay the taxes, and move on with more attractive uses for this capital. Does anyone know of US brokerages that have more sensible margin requirements for shorting or staying short low-price stocks? - Daniel

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