Selling Short?

Posted by JordanJ on April 17, 2017 (04:35PM)

I haven't tried selling short yet because I keep finding new rules and regulation regarding this type of trading. So to help clarify things, I need someone to help me with this example. I find a stock and it's price is $.50 per share. First, am able to short this stock (I read somewhere there is a $5 stock minimum?!). Second, if I can, what are the associated fees with it? Is it just the standard 4.95 +.65?

Posted by spshapiro on April 18, 2017 (08:58AM)

Remember beside the cost of “borrowing” shares when you sell short (which you are legally obligated to do), you can wake up any morning and find out that the shares you borrowed are no longer available to you (not your choice), and you are required to immediately buy back the shares you sold short. This of course could happen when the stock is higher than what you received, so you will incur a loss. Moral:- selling ain’t for the weak at heart.

Posted by irishneal11 on April 18, 2017 (12:25PM)

Good morning Jordan J

There are many additional industry rules affecting short selling when compared to purchasing a stock long. The prior message from sshapiro is on the mark in regards to the possibility being bought in at anytime. We do work hard to avoid this, however in a situation where a security is no longer available to borrow to cover a short position a buy in would occur. Take a look at the following link it give a pretty comprehensive review of the strategy of short selling.

https://www.tradeking.com/education/stocks/short-selling-explained

Regards

Neal Atkins

Client Services TradeKing LLC

Posted by spshapiro on April 18, 2017 (02:56PM)

There are rules that govern investing. You appear to be new here. On the chance that you are also new to the investing world, let me add, if you trade without a knowledge of the rules, you limit your ability to succeed. It would be like playing checkers without knowing that you can only move backwards, once you have a king.

Posted by the penguin on April 20, 2017 (11:57PM)

An alternative to the unlimited and margin risk of short selling is buying put options.

With your experience level maybe that is a better place to start.  There is no risk beyond that of buying an equity, but you will need approval to trade options.  It's either level 1 or 2 I can't remember. 

Margin is trouble you do not need in your life as a beginning investor.  

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