I don't know if there is a blacklist. But if there is, I would think that you would be correct.
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Blowing up a margin account
- Thread starter horowitzvlad
- Start date
I don't know if there is a blacklist. But if there is, I would think that you would be correct.
businessstaxes
Guest
like any business, if you owe them money,,they;ll sell your account to a collection agency an collect the money..they can put a lien in your bank account, house or job if you owe them money and call you everyday to demand payment. and its usually small amount and you can't short 10K with 2000 shares at 5 dollars..
you can max. short maybe $5000 or 1000 shares
so you would owe only $10,000 most stocks don't gap up 400% overnight..only penny stocks and you can't short penny stocks. or anything under $2
if you have money, than you will pay.
you can max. short maybe $5000 or 1000 shares
so you would owe only $10,000 most stocks don't gap up 400% overnight..only penny stocks and you can't short penny stocks. or anything under $2
if you have money, than you will pay.
Quote from horowitzvlad:
Question about liability and margin.
If I have 10k in my account and short 2000 shares at 5 dollars, what happens if, the next day, the stock opens at 20? Obviously, I lose my 10k, but is the broken completely liable for the 30k remainder? Can they sue a customer or respond similarly?
Quote from businessstaxes:
like any business, if you owe them money,,they;ll sell your account to a collection agency an collect the money..they can put a lien in your bank account, house or job if you owe them money and call you everyday to demand payment. and its usually small amount and you can't short 10K with 2000 shares at 5 dollars..
you can max. short maybe $5000 or 1000 shares
so you would owe only $10,000 most stocks don't gap up 400% overnight..only penny stocks and you can't short penny stocks. or anything under $2
if you have money, than you will pay.
They can only put liens on your assets and garnish wages only by court order. Think about it "businesstaxes". Can I just put a lien on your house? Who determines who broke a contract? A judge. You both have to go in front of a judge and he/she decides. This takes time and expense.
About the collection phone calls, depending on the state, in some states, they cannot phone you after you write them a letter demanding them not to call. Until they receive the letter, they can phone you. But send a registered letter saying to communicate only by snail mail.
Quote from torontoman:
They can't easily place a lien so quickly. They need a court order for that. In order to get a court order, they have to sue you. In order to sue you, they have to serve you, at which time YOU have some time to respond to the statement of claim. From the time they serve you to them getting a court order, that would take some time at which time you do have an opportunity to defend.
I doubt that they will take you to main civil action for 20K. That is expensive and time consuming for them. It could be a small claim depending on your state and this might be good news for you in that the cap for small claims is much smaller.
If your state's small claim cap is 10K, the broker might take you here, eventhough you might owe them 20K, because Small Claims Court is much cheaper. If you lose, the case is settled. They can't go after you for the remainder.
I doubt that they can collect their legal fees from you. The thinking here is that if they want to hire lawyers, that is THEIR problem not yours...unless the defendant is totally ridiculous...which that is not the case here. They might collect court costs, which would be minimal.
Having said that, they may not take legal action at all if they believe that you have no money and believe that you will no have any money for the forseeable future.
+1
each case is different. broker is not stupid and will not pursue the matter if it is about pennies (read few Ks).
that's why for instance IB has such a rigid risk management policy and for illiquid/volatile stuff they simply margin 100%.
it is likely though that your credit score will get a hit!!! this is why you may consider to make them whole after all - or be smart and make a deal...
Quote from dhpar:
+1
each case is different. broker is not stupid and will not pursue the matter if it is about pennies (read few Ks).
that's why for instance IB has such a rigid risk management policy and for illiquid/volatile stuff they simply margin 100%.
it is likely though that your credit score will get a hit!!! this is why you may consider to make them whole after all - or be smart and make a deal...
Good post.
Quote from dhpar:
+1
each case is different. broker is not stupid and will not pursue the matter if it is about pennies (read few Ks).
that's why for instance IB has such a rigid risk management policy and for illiquid/volatile stuff they simply margin 100%.
it is likely though that your credit score will get a hit!!! this is why you may consider to make them whole after all - or be smart and make a deal...
even though they may not pursue beyond writing letters I would not be concerned about your credit score. your credit will become nonexistent..
margin at 100% on a short sale protects fully only if the stock does not go up by more than 100 %. the original question is idiotic/hypothetical because stocks don't go up 4X from the previous close. if you think differently come up with a list.
.... well im guesssing most of you, who have signed the options contract have never read it ... so how about you go ahead and read what your signing. You in most cases arent even allowed to sue your own broker...think of a broker like a casino ... the house always wins... they have more capital than you do .. make sense?
Quote from 335ifurby:
.... well im guesssing most of you, who have signed the options contract have never read it ... so how about you go ahead and read what your signing. You in most cases arent even allowed to sue your own broker...think of a broker like a casino ... the house always wins... they have more capital than you do .. make sense?
no.
anytime you fight a large organization they have more assets than you. that is why lawyers take your case on a % basis.
Quote from 335ifurby:
.... well im guesssing most of you, who have signed the options contract have never read it ... so how about you go ahead and read what your signing. You in most cases arent even allowed to sue your own broker...think of a broker like a casino ... the house always wins... they have more capital than you do .. make sense?
Whatever contract says that you cannot sue them, that clause is unlawful..even if it's in the contract. They do not have the right to say that.
Having said that, those contracts from the brokers are strong, they will probably win, but my point was that they cannot suddenly put liens and garnish wages so quickly.