Shorting on downticks (2/2/06)

Discussion in 'Prop Firms' started by Billy Valentine, Feb 2, 2006.

  1. Which firms beside Bright and Hold Brothers are allowing traders to borrow stocks to short on a downtick? Also, is this available to firm proprietary traders, retail customers, customer LLC's, or all of the above?
  2. Just FYI, we don't allow anything that is not in full compliance with the rules, and I doubt that Hold does either.

  3. heavy


  4. I have a question about shorting that is similar:

    why do brokers require you to open a margin account to short stocks?...why do they want me to risk losing their money when i have my own?. Is this common to all brokers or just scottrade?
  5. bdon


    You must be approved to trade margin because the loss on the short is infinite. Your broker and the firm have to believe you can make good on a margin call, if it moves hard against you. YOu might not use all your equity to take the position but a bad move can blow through your remaining equity in a few ticks.
  6. heavy


    "why do brokers require you to open a margin account to short stocks?..."

    Actually, it's a technicality... natural shorts must be done in a "type 3" account (that's what most brokers call it), and type 3 accounts cannot be opened without a margin agreement. This is the reason you can't short in an IRA- because they are type 1 accounts (type 1 = "cash"). This has nothing to do with the unlimited loss potential of a short.
  7. Just a side note....check to see if you even want to short stock on a retail level...I doubt very seriously that you'll receive interest on the short stock sale. The broker keeps it all in most cases.

  8. bdon


    Thats exactly why there are different type of accounts.