Can you use cash from shorting stocks to buy stocks

[earth_imperator]

IMO, the settlement times should be at least halved, ie. T+1 becoming T+1/2, meaning that then one could use the capital 2x on the same day. More would be even better.

 

[newwurldmn]

You get the cash in that it offset any margin loan you are taking. But you can’t use it for anything you want, just like a commercial bank loan can’t be used for anything you want.

Thanks, but that's something I'm already aware of. My question was more about why they refuse to credit my short position by segregating it in Type3 account while forcing me to pay the dividend. This is like telling a person who gets a bank loan not to use that same money to pay off the interest. Once the loan is made, shouldn't he be able to do whatever he wants with that money?

 

[newwurldmn]

You get the cash in that it offset any margin loan you are taking. But you can’t use it for anything you want, just like a commercial bank loan can’t be used for anything you want.

-1. i was informed i was wrong.

 

[SunTrader]

So what good is shorting a stock do then? You can't use the money you get from selling it short.

Obviously you've never shorted. Best you keep it that way.

 

[schizo]

Because risk I assume. This would effectively allow people to lever up a lot higher that way, or even recursively - enabling them to short more shares with the (hypthetical, since it is what we are discussing) credit received from shorting shares. Not a recipe for financial stability where stock lenders are certain to get their shares back.

You get the cash in that it offset any margin loan you are taking. But you can’t use it for anything you want, just like a commercial bank loan can’t be used for anything you want.

But let's circle back to my initial question. If I'm not being credited for the borrowed shares, which somebody else BOUGHT FROM ME, why should I be responsible for paying the dividend to THAT person?

 

[Robert Morse]

Let's say, in a simple situation, a company has 100,000 shares outstanding, and I own all those shares. You short 1000 Shares and sell them to Joe. Now Joe owns 1000 Shares and I own 100,000 Shares. Your broker borrowed 1000 shares from my broker to delivery these shares to Joe. The company pays as dividend of $0.50 for each of the 100,000 shares out there. I own 100,000 shares but my broker only has 99,000 shares in book entry and Joe has 1000 Shares. Someone must make good on the 1000 shares lent from my account.

But let's circle back to my initial question. If I'm not being credited for the borrowed shares, which somebody else BOUGHT FROM ME, why should I be responsible for paying the dividend to THAT person?

 

[schizo]

Let's say, in a simple situation, a company has 100,000 shares outstanding, and I own all those shares. You short 1000 Shares and sell them to Joe. Now Joe owns 1000 Shares and I own 100,000 Shares. Your broker borrowed 1000 shares from my broker to delivery these shares to Joe. The company pays as dividend of $0.50 for each of the 100,000 shares out there. I own 100,000 shares but my broker only has 99,000 shares in book entry and Joe has 1000 Shares. Someone must make good on the 1000 shares lent from my account.

That's not what I'm asking. If Joe bought 1000 shares FROM ME, whatever he paid (minus the fee) should be credited to my account, and I should be able to use that money to pay out the dividend. But that's not the case here, or is it?

 

[Robert Morse]

The cash from the Sale is not your money! You can't do anything with it.

That's not what I'm asking. If Joe bought 1000 shares FROM ME, whatever he paid (minus the fee) should be credited to my account, and I should be able to use that money to pay out the dividend. But that's not the case here, or is it?

 

[SunTrader]

That's not what I'm asking. If Joe bought 1000 shares FROM ME, whatever he paid (minus the fee) should be credited to my account, and I should be able to use that money to pay out the dividend. But that's not the case here, or is it?

Only funds from settled trades are available.

 

[TheDawn]

You have USD 1.000.000. You short sell stocks for USD 1.000.000. You buy other stocks for USD 2.000.000.

Do you need to borrow USD 1.000.000 and pay interest or can you use the USD 1.000.000 proceeds from the stocks sold short?

For instance at IB.

No because the proceeds from shorting the stocks is not your money. It's the collateral that you pledged to your short position and it cannot be used to buy the stocks. To buy stocks with that proceeds is basically borrowing those funds again but with nothing to pledge to it leaving the broker all exposed to counterparty risk. No broker would do that.