Shorting stocks: Mechanical aspects Message Board

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Strategies & Market Trends : Shorting stocks: Mechanical aspects

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To: Jonathan Brown who wrote (48)	11/13/1997 6:23:00 PM
From: Q.	Read Replies (1) of 172

re. <<For every 5 short shares, 100 long? Really?>> dollars, I meant. More if you like. It is up to you to decide what is right for your portfolio. One thing to keep in mind, though, is that most brokers require a minimum $5 of margin collateral to short a stock, vs. 33% to maintain a long position. So if the stocks you short are < $15, as most of mine are, a dollar shorted uses up more margin maintenance than a dollar long. Thus, it would take more capital to be short $1 k than to be long $1 k. So regardless of how bullish or bearish you are, you have to keep in mind the margin capital you are using is consumed more rapidly by shorting than by going long. Anyway, be sure to ask your broker what your 'buying power for non-marginable transactions' is. That is your margin collateral. Make sure that it never runs very low (lower than your short interest, for example) or you will expose yourself to margin calls.

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