MJ,
I can understand the Call Writing and call buying and puts-----for example I write covered calls. If the person who bought my call that I sold to them does not exercise that call by the given date, the stock remains mine and I also have the call money. So, is there an analogy to be drawn here with the selling short-----if so then I think I can understand it.
We are obviously at opposite ends of the fence.
I don't understand options "at all".
It is certainly the next area of trading/investing for me to learn.
Now:
If one sells short and doesn't get a margin call by the broker then is it fair to say that the short doesn't have to be covered.
The only way one would ever get a margin call on a short sale is if the stock rose in value.
For example, if you shorted a stock at $1.00 and you had to provide 50% margin, you would have to put up $.50 for every share shorted.
Now, if the stock rose in value, lets say to $2.00, and you had no margin left in your account, you would get a margin call.
Most people that choose to use shorting as an investment tool use only a small portion of their portfolio for short sales.
For example, I am presently short SRCM, GUMM, and IRIDQ.
I am long ATHM, BRCM, HDI, HLIT, INKT, ISLD, LU, NOK, NTAP, PG, PSIX, T, VOD, WGO, et al.
I attempt to stay between 20% to 30% margin.
It is safe to say that my shorts would have to rise in value a bunch, and my longs would have to fall in value a bunch for me to get a margin call.
I hope this has been helpful.
Have fun,
Phil |
