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Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: GVTucker who wrote (86393)	7/30/1999 11:23:00 AM
From: Robert Douglas	Read Replies (1) \| Respond to of 186894

GV, Let's take, for example, a short sale of 100 shares of Intel at 70. The cash I would receive would be $7,000. If there were no other securities at all in the account, I would need an initial margin of 50%, or $3,500. I would receive interest on $10,500 cash. If Intel were to rise to 80, I would receive interest on $10,500 cash. If Intel were to decline to 60, I would receive interest on $10,500 cash. Maybe different brokerage firms do it differently but that is not how my short account works. My short balance is marked to the market every day. The interest I receive on that balance is slightly less (80 to 90% of the full market rate) than the interest I receive on the cash balances held in that account. If the price of my shorted stocks drops I receive the full market rate. If the price of those shorted stocks rises, I receive less at the full-rate and more at the lesser rate. If I were on margin, I would indeed be paying margin rates if the shorts were at a loss. Example: Short 1,000 shares of Intel at $70. Have $100,000 cash balance in account. Intel closes at $70: I receive interest at 5% on $100,000 and 4.5% on $70,000 from INTC short. Intel closes at $80: I receive interest at 5% on $90,000 and 4.5% on $80,000 from INTC marked to market. Intel closes at $60: I receive interest at 5% on $110,000 and 4.5% on $60,000 from INTC marked to market.

To: GVTucker who wrote (86393)	7/30/1999 4:39:00 PM
From: Paul Engel	Read Replies (1) \| Respond to of 186894

GV - Re: "That is incorrect. Let's take, for example, a short sale of 100 shares of Intel at 70. The cash I would receive would be $7,000. If there were no other securities at all in the account, I would need an initial margin of 50%, or $3,500. I would receive interest on $10,500 cash. If Intel were to rise to 80, I would receive interest on $10,500 cash. If Intel were to decline to 60, I would receive interest on $10,500 cash. If Intel were to rise to the extent that my equity declined under 30% (in this case, about 116«), I would need to either deposit cash or securities in the account, or buy back some Intel to raise the equity back above the maintenance level of 30%. Note that I still have not been charged any interest. The only reason you have to pay interest is when you borrow money. A short seller does not borrow money. A short seller only borrows stock. The cost of borrowing stock is negotiable, and for most stocks, that cost is zero." No - YOU ARE Incorrect. Paul