Short Selling and Margin Accounts

I would like to start short selling, but I need a margin account. I don't wanna use any margin, but I need to have a margin account to be able to short stocks.

When I open my account, is it possible to not use any margin? How does it work exactly? I select how much margin I want to use or is it automatic, like 50% will be cash and 50% will be margin?

Any tips?

 

When you say," I don't wanna use any margin,", are you referring to borrowing money? You don't borrow money when you sell short, but you are using margin because you have to deliver stock you don't own. Who is your current broker?

 

iTrade.
I just realized what I said made no sense. I meant, is it possible to buy long and not use margin?
That means when you short sell, you'll always have to pay interest on that amount you borrowed?

 

If you open a margin account with $30,000, we can set you at 1X and you can't use margin. when you sell short over night you may incur fees for the borrow of the shares. If you only DT, you only need a locate, not a borrow.

 

margin is used when the stock you own (long) exceed your cash balance.

 

Not sure what that means.

So no interest for day traders?

Again, I'm confused.

I honestly thought it would be more simple. From the research I've done.
Let's say, I have $30,000 in my account and I short a stock 1000 shares of $5. The value is $5,000. Therefore it uses the money I have in my account and that it will only borrow money if I have no more money in my account.

 

Now you are confusing me.

No. In this example, you short $5000 in stock. You have not used any of the $30,000 except your buying power is reduced. You have not paid for anything, In fact the short account (Type 3) there is a balance of $5000 (You sold stock you did not own) and your margin account (Type 2), still has the same $30,000.

Even if you short $40,000 in stock, you are still not borrowing money, because you still have not paid for anything. You might get charged to borrow the stock you sold so your clearing firm can make delivery, but you are not borrowing. To borrow, you need to buy more than your equity. Buy!

 

I think I'll just stay away from a margin account for now.

 

What about the short collateral that we are expected to post. If you short 10k, there will be a cash use of 10k based on my understanding. If account doesn't have 10k, it will be charged an interest fee too.

 

That was exactly my understanding as well... It is what I was hoping for.