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Strategies & Market Trends : Momentum Daytrading - Tricks of the Trade -- Ignore unavailable to you. Want to Upgrade?

To: Mama Bear who wrote (732)	3/18/1998 12:29:00 PM
From: peter michaelson	Read Replies (2) \| Respond to of 2120

Barbara et al: I have also had difficulty figuring out the interest on short sales. Can you help? I think there are two aspects, n'est-ce pas? Correct me where I'm wrong, please. First, it is required that there be enough equity in the account to cover the amount of the short sale. If there is enough cash to cover the full amount, then no borrowing is required. If borrowing is required then margin interest would be charged on the amount borrowed. Second, cash comes into the account as a result of the short sale. One would initially believe that interest should be earned on this amount, but it seems not to be the case. I believe that one does not earn interest on cash derived from short sales. Why would one not earn interest? The broker borrows the shares from another account cost-free, I think. The lender of the shares is paying interest on any borrowing he/she undertook to purchase those shares. The loan costs the broker nothing, gets cash from the sale thereof, but pays no interest to the short seller. Broker gets interest-free loan and earns interest on it. Is this correct? Is it fair? Sorry if this sounds confused. It is. thanks in advance peter

To: Mama Bear who wrote (732)	3/18/1998 12:47:00 PM
From: dpl	Respond to of 2120

Barbara,unless things have changed in the last few years(and they may have)you do not pay interest when shorting a stock.At least I never,never did in the last few decades. If you short 100 shares at 100 that is $10000.You must put up $5000.You now have a credit of $10000 in your account(after all you "sold" the stock and someone paid you for it) At this point you should not pay any interest.If the stock goes against you,lets say to 110 then it is against you $1000.You will now be charged interest on the $1000. This is the way it has been for decades.I have not been in this situation for several years since I now only daytrade so if it is different now somebody correct me. David