Wow, some really good questions, RWalker! (And thanks, Vicki, for your answers to the questions I posed).
Unfortunately, RWalker, I don't have anything I would call knowledge concerning the answers, and so I can't do full justice to your questions. I'm hoping someone else will pipe up and save the day. But I can make a few comments as we wait, however,and try to get some info from my broker next time I talk to him- I had some trouble yesterday trying to short a $20 stock that is apparently non-marginable, and I've been pressing Schwab to explain why, with little success. I will have to wait a few days for their response. Sigh...
Marginability is a bit arcane and there are many issues involved, that much I know. Also, whereas some stocks are non-marginable everywhere because of Fed standards, sometimes a stock that is marginable with one firm, say Schwab, is not marginable at another, say Aufhauser. Now, here is one thing that I think, but can't claim to know (someone please correct me if I'm wrong!!!): the non-marginability of sub-$5 stocks is widely practiced by brokerages, but not Fed mandated- my reason for so thinking finds its source in anecdotal evidence. Over on the Motley Fool boards where I hang out a lot several people have reported getting shorts in at $4 and change. I also believe, but don't know, that MMs can and do short sub-$5 stocks in which they make a market- they're exempt from lots of rules, as I understand it, another one being "naked shorting", i.e. selling short without actually borrowing (I might be wrong about the permissibility here, but it is well documented that it occurs).
So to your specific question <<...when a non-marginable stock comes under selling pressure, does it include a short sale component>>, I have to say it depends on the precise sense in which it is non-marginable, i.e. whether the non-marginability is brokerage specific or industry wide.
Now to Gandalf. Your analysis sounds pretty right to me, except that, if what I've said above is correct, there might still be some selling pressure by shorts- but again, I wouldn't think much of the pressure came this way.
<<...what happens when an under 5 (and therefore cannot be short sold) stock moves above 5 during the day? Does it get marginable (and therefore can be short-sold) properties immediately?>>
I have always assumed that it could be short-sold immediately, but again, this might be brokerage-specific....Another thing to ask my broker!
Thanks for the dialogue, RWalker. I'm hoping someone more knowledgeable will pop in now to save the day!
Anaxagoras |
