dumb question about margin and shorting

[Magna]

Originally posted by candletrader
I would not suggest you short 4000 shares of a $25 stock unless you are very experienced.

Have to agree, but would add the same for going long. The key, vis a vis experience, is the 4000 shares, not the direction.

 

[NeutronJuan]

I've noticed that many ETF's have a margin requirement of 50% for long positions and 150% for short positions. In this instance I assume that one may not be able to hold as many shares short as one may be able hold long for a given account value. If this is a misinterpretation, please let me know.

 

[vikana]

Originally posted by NeutronJuan
I've noticed that many ETF's have a margin requirement of 50% for long positions and 150% for short positions. In this instance I assume that one may not be able to hold as many shares short as one may be able hold long for a given account value. If this is a misinterpretation, please let me know.

Schwab, a few years ago, used to have similar rules/wording like this. The reason is simple. As you short (which is a sell) the proceeds goes into the account. They want to make sure that the proceeds doesn't count towards your account margin balance; so they count a short as 150% margin to remove the proceeds from the marginable account balance.