Short selling

keret · #1 (**permalink**) 11-16-07, 05:26 PM

I have a question about short selling:

I have read a lot about it and I now want to give it a go. I know I need to have a margin account (which I will have soon) but I am not sure about how to execute the trade.

What button do I press? Sell? Does the system now is a short selling trade and not long?

I know they are stupid questions but I need help with the technicality of placing the trade....

Thanks/regards

Stocktrading101 · #2 (**permalink**) 11-16-07, 06:11 PM

That's a great question.

When it comes to placing the actual order, what will happen is they will give you an option to "sell short" (once you have margin approval).

For example, on my TD Ameritrade order screen, it displays:

Buy
Sell
Buy to Cover
Sell Short

Buy to cover is to what you use to buy back your shares and exit your short position.

Hope that helps and good luck with the shorting, now is the time to do it!

keret · #3 (**permalink**) 11-16-07, 09:47 PM

Hey that was super-easy,

thank you so much!!!

One more question, I read above leverage; if I have $10,000 can I short sell for how much?

Thanks again...

keret · #4 (**permalink**) 11-18-07, 01:02 PM

I see nobody's answering the 2nd question; let me re-phrase it...

If I go long and I have $10,000 in my account then I can only invest what I have (i.e.10k); but if I short sell then I know I can invest more. How much more?

What is the ratio?

Hope this is clearer...but maybe not

Thanks/regards

Airelon · #5 (**permalink**) 11-18-07, 05:13 PM

To be honest mate, I'm not sure. I never use margin, long or short. As close as I get, is Futures options, which plays off the tremendous margin leverage capability of straddles. But as far as margin for investing? Just rubs against my financial grain somehow. Have a philosophical problem with it.

StockJunkie · #6 (**permalink**) 11-22-07, 01:11 PM

Quote:

One more question, I read above leverage; if I have $10,000 can I short sell for how much?

If you are short selling you must have margin enabled on your brokerage account. The standard leverage is 2 to 1 meaning you can trade up to two times your money.

So, regardless if it is a short or a buy you could trade at any time in your case up to $20,000 worth of stock. I would be careful with utilizing margin on shorting though only because your upside risk is huge for a margin call.