If you are long a stock, you can short against the box without putting up any additional capital. Does it work the opposite way? In other words, if you are short, can you buy long without putting up additional capital??
David,
The margin requirement varies from house to house. At Fidelity, a boxed long/short position requires only 5% margin. So, going from pure short to a boxed position actually cuts down on the margin required by a substantial amount (and unwinding the box then adds to the margin requirement).
FWIW, I unwound my box about a dozen points ago and replaced it (at the same time) with a calls that I bought. My logic was that, while a boxed position sees no gain on the downside (or upside), a short/long call position can at least see a gain should there be a sudden dramatic downward move. Also, though it costs additional premium, the call position can be ratcheted up (i.e., tell your broker you want to do a spread at x net credit, in which you sell the original call position and open up a new higher call position).
Gary Korn |
