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Microcap & Penny Stocks : Teletek: Big Earnings About To Be Posted
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To: Larry Davis who wrote (459)3/17/1996 9:22:00 AM
From: angel   of 1014
 
Larry,

I have used margin before on short term positions and it works
as follows:

First you need to get a position in a stock that's marginable.
There is not definitive rule for the stock been marginable but
the rule of thumb I've heard is that it needs to trade at more than
$5/share. There are other factors involved which I am not fully
aware of.

Once you get your position then the brokerage house will lend you
funds up to generally 50% of your position. So you can just write
a check for this amount for a quick cheap loan or you can purchase
more securities with this money. In the later case you can basically
double your position (if the new shares are also marginable).

The interest rate is fairly reasonable currently about 8% but this
might depend on your brokerage house.

Of course there is one drawback; if your positions decrease in value
to less than 200 % of your borrowed funds you will get what they
call a margin call from your broker. They will basically ask you
to deposit more funds into your account or sell some of your
positions to bring the ratio back to >= 50%.

In the case of TLTK as soon as it becomes marginable you could
double your position and thus eventually almost double your gain.

Note that trading on margin is NOT for everyone you need to be able
to cope with the extra risk and sometimes sell at a large loss just
to cover your position. This technique should only be used with
extreme care as you might end up owing more than what you OWN ;->.

Hope this helps.
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