Good point Stock Addict. Be sure to check to see i
Post# of 22940
Posted On: 08/23/2016 9:38:19 PM
Re: StockAddict #11718
Good point Stock Addict. Be sure to check to see if your brokerage account is cash only, or cash/margin. If it's cash only SA is correct but if it is cash/margin, which many are, lock your OTC shares down in a sell order.
The following is taken from AOL's "The On Line Investor" under the subject of "Selling Stock Short":
On the other hand, if the stock is traded on the NASDAQ, no problem. Because there is no central exchange, different market makers will take your short sale on the bid side of the market, as long as they can borrow the stock to accommodate your sell. If the stock gets hit too much, they simply stop trading the stock until buyers return to the stock. The ability to borrow the stock is a big deal in shorting stock, both on the NASDAQ and the exchanges and here's what that means:
Borrowing Stock: When you enter an order to sell a stock short, you must tell the broker you're shorting the stock. The reason? The broker needs to be able to borrow the stock from someone so that it can deliver to the buying party the stock you want to sell. Think about it. You want to sell something to someone who wants to buy it. They want to own the stock. So you have to be able to deliver stock to the buyer. But you don't own the stock. You're shorting it. Where does the stock come from that the buyer gets? It comes from another account that has the stock and has signed a margin agreement with the broker. If an account has a margin agreement, it says, in the fine print, that the broker can borrow stock from the account to use for its own purposes. It's standard practice in the industry. That's why brokers like margin accounts. You should like them, too, because borrowing money in your margin account is probably the cheapest way to borrow money. However, having that margin account allows the broker to use the stocks in your account for its own purpose unless you don't give the broker that right. But most investors do.
The following is taken from AOL's "The On Line Investor" under the subject of "Selling Stock Short":
On the other hand, if the stock is traded on the NASDAQ, no problem. Because there is no central exchange, different market makers will take your short sale on the bid side of the market, as long as they can borrow the stock to accommodate your sell. If the stock gets hit too much, they simply stop trading the stock until buyers return to the stock. The ability to borrow the stock is a big deal in shorting stock, both on the NASDAQ and the exchanges and here's what that means:
Borrowing Stock: When you enter an order to sell a stock short, you must tell the broker you're shorting the stock. The reason? The broker needs to be able to borrow the stock from someone so that it can deliver to the buying party the stock you want to sell. Think about it. You want to sell something to someone who wants to buy it. They want to own the stock. So you have to be able to deliver stock to the buyer. But you don't own the stock. You're shorting it. Where does the stock come from that the buyer gets? It comes from another account that has the stock and has signed a margin agreement with the broker. If an account has a margin agreement, it says, in the fine print, that the broker can borrow stock from the account to use for its own purposes. It's standard practice in the industry. That's why brokers like margin accounts. You should like them, too, because borrowing money in your margin account is probably the cheapest way to borrow money. However, having that margin account allows the broker to use the stocks in your account for its own purpose unless you don't give the broker that right. But most investors do.
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