Noob question shorting vs buying

Bugsy

Bugsy

Not sure I fully understand it and my question may seem illogical, but seems as though it would be far more profitable buying on margin vs shorting.

For example, if I had $25,000 I could buy $100,000 worth of stock on an assortment of companies charts I had analyzed. But if I shorted the stock I could only short about $16,000 worth of the shares.

Wouldn't it be more profitable over the long term analyzing an assortment of charts and switching around for buying opportunities after selling a position vs ever shorting any positions?

As stated maybe I'm confused on how it all works and would appreciate anyone clearing it up if I am. Thank you in advance.
 
You assume everyone is using Reg T margin, most professionals use Portfolio margin which 99% of the time doesn't differentiate between a long and a short position.

Additionally, selloffs tend to happen faster than rallies which skews the profit/margin-to-time ratio.
 
d08 said:
You assume everyone is using Reg T margin, most professionals use Portfolio margin which 99% of the time doesn't differentiate between a long and a short position.
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Ahhh sorry. I don't know what portfolio margin is. Just began reading books and went online to understand shorting and saw it said the 150% equity. Does portfolio margin work the same way as buying on margin where you only use 50% equity?
 
Bugsy said:
For example, if I had $25,000 I could buy $100,000 worth of stock on an assortment of companies charts I had analyzed. But if I shorted the stock I could only short about $16,000 worth of the shares.
More...


Bugsy said:
Ahhh sorry. I don't know what portfolio margin is. Just began reading books and went online to understand shorting and saw it said the 150% equity. Does portfolio margin work the same way as buying on margin where you only use 50% equity?
More...


  • The 150% equity is times 150%.
  • $25,000 x 150% = $37,500 worth of stock you can short.



:)
 
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