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Strategies & Market Trends : Rande Is . . . HOME -- Ignore unavailable to you. Want to Upgrade?

To: e.von who wrote (51271)	5/3/2001 1:29:49 PM
From: eric012	Respond to of 57584

Re shorting under $5 All short sales involve borrowing a stock (in a margin account) and selling it. A stock must be available for borrow - iow - it must be "margin-able" in order to sell it short. Generally speaking, it is a good rule of thumb that stocks UNDER five dollars will not be marginable, and therefore cannot be shorted./ It is also true that some stocks, though they are available for purchase on margin, may not be available for borrowing (shorting). so - no stocks that are not marginable may be shorted, and some stocks that are marginable may not be available to short. But - it is possible that a stock that is marginable, and has traded above five dollars forever suddenly dips below 5 dollars... There will be a little lag time before the stock get's re-classified as not available for purchase (or borrow) on margin.

To: e.von who wrote (51271)	5/3/2001 1:55:39 PM
From: Rande Is	Respond to of 57584

. . . . The Darker Side of Short-Selling . . . Eric is correct. Non-Marginable stocks with a typical large broker cannot be borrowed, so they cannot be shorted. However, I would like to add other perspectives to your question. 1. Traders with enough "juice" can get their brokers to do pretty much whatever they wish. In other words, if you have enough dough in your trading account, and you wish to borrow stock that is "non-marginable", you can make a call to your broker and he may at his discretion decide to lend you the stock for shorting. . . .or he may make the phone calls for you to find someone else who has the stock available for borrowing. 2. Another perspective is this. . . . if you are in Canada, offshore or literally anywhere other than within the U.S., you can more easily get your broker to lend you the shares you need to short a stock under $5. It is not illegal to short-sell OTC penny stocks in Canada. So to the many Canadian traders we have here, the answer to the question, "can one short a stock under 5 bucks?" . . .is a resounding, "yes!" . . . .often with big grins attached. Is this fair? Well, probably not. Is it legal? Yes, for the traders who live outside the U.S. What about the traders who live within the U.S., but use offshore brokerages in order to short-sell non-marginable stocks? Is that legal? Well, I don't believe it is, but yet it is done every single day. 3. There is another way to short-sell stocks under $5 or non-marginable securities. It is called "naked shorting", where brokers within the U.S. [or without] allow you to short-sell a stock, without there being any shares available for borrowing. I don't believe this is legal either. . . and yet it is done every day. . . just as people run red lights or speed when nobody is watching. However, when it comes to what is legal and what is done, they are two completely different questions. I am telling you what is done. For advice on whether or not it is legal, I would suggest you consult an attorney or write to the SEC. I hope that helps clear some things up about short-selling. Rande Is