When you short a stock, what are your margin requirements?
If I were to short 100 BTGC to protect the 100 I own (I sold off 50 yesterday, figuring I might as well hold the cash instead) Discover would require me to have $500 in reserve ($5 per share or 50% of the purchase price, whichever is higher.) Then, to maintain the position, I would need $5 per share or 35% of the purchase price, whichever is higher, plus $2000 minimum equity in the account.
On top of that I imagine I would be charged interest on the difference between that $500 and the actual purchase price, which comes to $200 at the moment.
I would count all of that as costs for shorting, plus the commissions you mentioned. If BTGC's price moves, the shorted shares move in the opposite direction to cancel out the change, but there's still a net drain on your account due to the margin costs. Of course, the more shares you own, and the more you short, the lower those costs get percentage-wise. So, if you've only got a small position, this strategy is probably not a good idea.
Doug.
PS: How's that little weather thing going? |
