Registered: Jan 2006
04-19-12 04:10 AM
I read it, and the problem was Megan C did not explain it to him correctly.
If you short a stock, you are charged interest to short it, it can be a very small amount.
You have to short stock in margin account not a cash account. So you need to calculate your margins correctly.
For example, if you are 20% margin, your margin account is not maxed out and you would not be liquidated. I believe normal margin for stocks is 50% for max.
So when you are under margin for example, you could take money out of your account which is like a loan against your account. I assume on IB you just have one account not a separate account that has cash in it, and another account that has margin positions in it, but I could be wrong.
Now if you short a stock that pays interest, my understanding is that you have to pay the interest to the original owner of the stock, but I could be wrong.
So the lesson learned is don't go max out your margin. In the past my broker would give me a margin call and let me close out enough positions to get back under margin. It seems like some brokers, just instant close positions these days.