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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: Dominick who wrote (12294)	3/12/2001 8:49:04 PM
From: Eric P	Respond to of 18137

I do have a pet-peeve about being forced to use a margin account for shorting. If a cash account has ample funds and is subject to similar margin call requirements to protect the firm, I should have the option to choose the type of account I want. Dominick, I think the reason for this is to ensure that a cash account can absolutely positively never go to a negative balance. If you buy stock in a cash account, the absolute worse that can happen is your stock drops to zero, along with your account. However, if you short a stock, the worse that can happen is that a stock goes to the moon, from $20/share to $200+/share. In this case, your $10,000 'investment would have lost $90,000 on the trade, making your account balance now 'worth' a negative -$80,000. Ouch! To prevent this potential for negative balances, Retirement accounts such as IRA's and 401-k's must be invested in a cash account and are not able to hold short positions. I'm sure you knew all of this, but hopefully it might be educational for others. -Eric