A little background before reading the first and only post from this new alias...
He posted on a thread that has had exactly 1 other post in the last 3 years. In fact, other than some sporadic posts, the thread hasn't seen any real activity since 2001.
He posted a question about shorting the stock on a thread where the posters were all longs. So much for how to make friends and influence people when you're a new poster.
The stock he shorted was actually up 60% today. That's right. Up!!! To be fair, he did short after the initial price run up.
The stock he chose to short was originally priced somewhere in the vicinity of $1.25 per share, but he shorted at $2.48... Yeah, initiating a short on a stock where the most he could ever possibly hope to make was $2.48 a share, in a stock that was making a huge move up. (He says he covered at $2.17...)
Lastly, according to the post, this is the first time he ever shorted a stock and he doesn't understand the margin or much else about the transaction. The Boy Scout motto is be prepared...
Anyway, the post (though serious from the poster's perspective) struck me as quite humorous.
Message 25665079
Hi all,
Yesterday I short OXGN for the first time. But, I'm not yet able to understand the whole transaction. Especially, Margin call and Margin requirements.
I'm trading with Ameritrade. I short sell 1000 stocks at 2.48 and covered at 2.17 close to end of day. Initially I had 2500 in my account with Stock BP of 5,200.
Why I'm not able to sell short stock of $5000 ? why is stock BP more than 5,000 ? Isn't it suppose to be double of Cash available for trading ?
According to Ameritrade the Initial Margin requirement is 50% and Margin Maintenance is $2,500(1000x$2.5 since the stock is trading below 2.5)
When I was holding my balances were like this
Funds available for trading : 1250 (nearly)
Account Value was changing between 2300 - 2800.
Stock Bp : 890 ( but I'm not sure, I may be wrong with this)
Short balance : 0
So according to Margin Maintenance requirement I'm supposed to maintain $2500. Why I'm not issued with Margin call ? Can anyone please explain with calculations. Can I use that $1250 to short stock again ?
Sorry for being naive this is my first short trade. Thanks in advance
EK!!! |
