I have Roth IRA account with IB. Let's say if I have $4000 in cash in my Roth IRA account, can I short 100 stocks at $30? My max loss is $3000 which is covered by available margin in my account. I don't see any issue but there are weird rules with Roth IRA and I am sure one of you knows the answer. Thanks, buskya
From the IB website: "US IRA accounts are never allowed to borrow cash (have a debit balance or short stocks) in a Reg T Margin account. "
How do you figure that's your max loss? What if you were short 400 shares of DNDN at $7.25 a couple of days ago, then the stock gaps up overnight to $23?
When you are long a stock your max loss is the value of the position because stock price cannot go below zero. When you are short a stock, your intraday risk is limited to your stop loss, but your overnight risk is unlimited, as the DNDN example illustrates.
What was i thinking! You guys are right that my max loss is unlimited and not 3k as I originally thought when I short the stock . I never shorted the stock straight out but used options (not in IRA) to simulate the same.
I would like to add: Considering that the Wall Street Wizards responsible for such investment miracles as CDO's and CDS's are still running loose, it is entirely possible that they will find a way in the not-too-distant future to allow a stock's price to indeed go below zero, creating the same unlimited profit opportunities for short-sellers that are now enjoyed by those who are long. (Let's face it, naked short selling is poor substitute.)
No, but you can buy all the puts you want or if you don't know options you can short a sector with an ETF.
There are plenty of inverse ETFs that allow you to short an index by getting long. While it does not cover everything you would like, there are many ETFs these days for this purpose.
You can trade FUTURES long and short in an IB Roth IRA. I know cause I have done it and still do it. Stock, no shorting because you have to borrow money to short, and there is no borrowing in cash/IRA account.