Important Notice on Shorting
Submitted by lucas20 on Fri, 02/22/2008 - 18:26.
I have added this to the Help section and to the Short ticket.
When you are short any position, you must have enough CASH BALANCE in your account at the end of the day to keep that short position open. If your deficit on the short position falls below your cash balance, your position will be covered.
For example:
Day 1: Open SHORT 1 position for XYZ company at $10, leaves me with balance of $5.
Day 2: XYZ soars to $18 on a buyout rumor. I will now cost you $18 to cover the share, but you only have $10 from selling the original short and $5 in cash. At the close your position will be covered leaving you with a $3 deficit.
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Right
Yeah I clearly didn't understand this when I shorted the S&P. Every day, I looked at my account and thought, "Where did that cash go that I had?" And then one day, my shares started disappearing.
Lesson learned.