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Pastimes : Asensio** King of the Shorts - LET'S RUMBLE! -- Ignore unavailable to you. Want to Upgrade?

To: Mama Bear who wrote (227)	1/14/1999 6:08:00 PM
From: Daniel Chisholm	Read Replies (1) \| Respond to of 257

But why should a margin account be required for shorting? JohnG pointed out that mark-to-market cash flows occur between a "short" and "margin" account. However, why could one not have a "cash" account (with a certain amount of cash in it) and a "short" account and proceed to short a stock, with the understanding that cash would flow between those two accounts? Is it that in addition to having to hold cash equal to 100% of the short's current value in a (usually non-interest-bearing) "short" account, one also has to maintain an additional (typically) 30% or 50% "margin"? And that this "margin" or "buying power" can only come from holding cash or marginable securities in a margin account? With respect to paying interest on borrowed stock, it is my understanding that there typically is a charge incurred by the broker to borrow stock, but it is usually quite small (i.e., much less than the T-Bill rate). Sometimes in the case of a stock that is very much in demand the rate can exceed the T-Bill rate. I have simply assumed that for small retail investors the broker simply keeps the interest earned on the "short" account balance, and in turn does not charge interest on the borrowed stock. I've sometimes wondered if "we can't borrow that stock" really means that they can't borrow it, or if the rate is simply too expensive for their taste. Anyone else read Niederhoffer and wonder why when he wrote about short selling he seemed to imply that even he wasn't paid interest on his short sale proceeds? - Daniel P.S. Does anyone else smile/grimace when their broker: - allows them to short stocks, but not sell naked calls? - allows them to sell covered calls, but not naked puts?