I want to try something. Suppose I have an account with $80,000 worth of stocks and ETFs short. I want to buy a car for about $15,000 cash. Can I take a margin loan against my short positions to do that?
No. The cash in the account from the short sale is collateral for the stock delivery of shares sold you do not own.
I called IB and they said you can. But it just does not seem right so I came here to get some more insight. I am not saying you are not correct, just that I am confused.
You cannot withdraw the cash you get when you sell stock short. Even if you could, that would not be a margin loan. I think some brokers may, in some contexts, allow a customer to use the money to buy other securities within the same account.
I left a bit out. I shorted $80k in one account and the positions are still in that account. I have a second account that is Used to borrow margin money against some long positions. I was thinking of transferring the short positions to the second account and trying to borrow against those. I may blow up IBs systems if I try that. Again, not disputing any of these answers, just curious at this point.
Let's say my account has $100,000 in cash, no positions. Then, I short $100,000 AAPL. My balance is now $200,000, but my equity is still $100,000. My maintenance margin requirement is about 30% of my cash plus 100% of the value of the collateral. That means you can't remove the extra $100K from your account, as it is not your money. It is held as collateral.
Robert: Using your scenario of starting with $100K cash, shorting $100K AAPL would only require $50K initial margin. Therefore, you could withdraw $50K from the account. Note to the original poster, this is not called a margin loan. You're just withdrawing the excess margin in the account. After you have withdrawn the $50K, the account would hold $150K in cash. against the $100K short position. In the scenario the original poster suggested, if he had $80K in short positions, and initially had $80K in cash, he could withdraw $40K in cash. His short position would be margined by $120K in cash.
Just thinking out loud, or on the screen here... If you sell stock short, and the price of the stock drops significantly, then that would reduce the maintenance requirement for the short position. And that would potentially allow you to withdraw some portion of the cash proceeds of the short sale. Right?
If the price drops your equity increases, so you could potentially withdraw down to maintenance requirement. In my opinion that wouldn't be too smart because you're too close to getting a margin call with a small rally. I would suggest withdrawing no more than half, the initial margin.