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Joe Craig
Ellicott City, MD
StockCentral Administrator
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| 07/05/2007 9:58 AM |
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Mark Robertson has sold 20 shares of Apple from his 25 Stock to Own portfolio. What's that, you say? Mark didn't own any shares of Apple? That's right, Mark has "shorted" Apple.
Read Mark's rationale over in the Apple forum. |
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Joe |
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JAMES THOMAS
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| 07/05/2007 2:25 PM |
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Shorted on what date at what priced?
What rate of margin interest will Mark be paying on the borrowed funds?
-Jim Thomas |
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Joe Craig
Ellicott City, MD
StockCentral Administrator
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| 07/05/2007 9:57 PM |
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Mark sold 20 shares of Apple at today's closing price: $132.75.
We're using TDAmeritrade's fee structure, so Mark will be paying 11%.
He will not be earning interest on his cash balance, assuming that I've read the TDAmeritrade pricing correctly. |
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Joe |
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JAMES THOMAS
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| 07/05/2007 10:34 PM |
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Do I have the following right?
Mark currently has a cash balance of about $3,692 ($1,046.84 from selling EXBD and $2,645.01 from selling short APPL). He will only pay margin interest if the amount needed to purchase what he's short exceeds his cash balance. So, assuming no other transactions, he'd be safe from margin interest until AAPL gets to around $184/share.
-Jim Thomas |
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JAMES THOMAS
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| 07/05/2007 10:55 PM |
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I'm reading http://www.tdameritrade.com/forms/AMTD086.pdf, on page 10 and I'm getting confused. I think it says that when 20 shares are shorted at $132.75 ($2,655) TD Ameritrade retains the proceeds (they don't show up as cash in the account). In addition, 50% of that amount needs to be in the account in cash initially to meet Federal Reserve Board requirements . Mark doesn't have $1,327.50 in cash. Does that mean he's got to borrow the difference (on margin) at 11% interest?
No, I see that's wrong. Mark needs to have $1,327.50 in cash or loan value (50% or market value) from marginable securities, which he does have.
What I can't figure out is what triggers margin interest to be charged on a short sale.
-Jim Thomas |
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Jeanie Krieger
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| 07/06/2007 6:50 PM |
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| OK, I know I'm being picky, but I thought the competition was "25 Stock to Own". If you short sell a stock, are you really owning it? Is that part of the spirit of the competition? Jeanie - who obviously knows very little about shorting stocks. |
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Joe Craig
Ellicott City, MD
StockCentral Administrator
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| 07/07/2007 10:26 AM |
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Jeanie,
Thanks for the quibble!
Mark asked, and I agreed, that he'd be allowed to sell Apple short. As were mainly interested in education, this should be educational for all. |
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Joe |
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