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Zecco.com » General Investing » Margin Trading » short sale proceeds
Last post 07-31-2008, 7:00 AM by Uncle Billy. 1 replies.
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  •  07-31-2008, 6:47 AM 34546

    short sale proceeds

    Reply Quote

    Hello,

    a little help with this one please.

    Suppose you have an account with $10k. and decide to short a stock at $4 times 1000 shares. You end up receiving $4000 for this trade. But what happens with this money as lomg as the trade is open?

    do you have $14k to trade with? ie can you purchase stock worth $14k? and i know there is the margin reqirement issue ( i think its 50%) so you have to have at least $2k worth of equity at all times but still can you use the remaining $12 for stock purchases?

    thank you

  •  07-31-2008, 7:00 AM 34547 in reply to 34546

    Re: short sale proceeds

    Reply Quote
    In your example you started out with a credit balance of $10,000.  After selling the shares short you now have a credit balance of $14,000 and a debit of 1000 shares of the sold stock.  Of the $14,000 cash credit, the proceeds of $4,000 as well as your initial margin of $2,000 (50% of $4,000) are segregated as security for the 1000 share debit and are unavailable to you.  Therefore your account has $8,000 in unrestricted cash, $6,000 in restricted cash and a debit of 1000 shares of the shorted stock.
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