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Strategies & Market Trends : Roger's 1998 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: santhosh mohan who wrote (6524)	4/8/1998 9:09:00 AM
From: Allan F	Read Replies (1) \| Respond to of 18691

First I assume one has enough stock equity to cover any margin calls. I think by and large a safe assumption. Now one can short using longs that otherwise be just sitting there do nothing. If one did the same thing buying instead of selling on margin, one would be paying interest until the position is closed. It is true that if the short moves against you, a mark to market will occur and one either needs additional cash or must borrow the cash against other equity. In that case, interest is being paid. Strictly speaking I may have used oppertunity cost incorrectly. But if one is going to own say $10K in stocks long, using it as equity to short $5K in other stocks will not require any additional funds. Contrast that with buying an additional $5K in stock on margin. You will be paying a carring cost equal to the margin interest rate. Hope that helps, -Allan