Question about selling short

until either the stock goes to $1million or you die

there is no limit on when you must cover, unlike with options when they expire. you can hold for years if you would like

Until your broker decides to issue a margin call which you can't come up with.

http://en.wikipedia.org/wiki/Short_(finance)

ya theres a thing called margin, meaning you have to have a certain amount of equity so incase the stock decides to blast off, your broker won't be left with the bill.

Naa, no time limit, but just keep in mind the longer you hold on to it, the more margin interest you rack up. Holding it for a few days, assuming a decent profit (or even a small profit) will make the margin interest charged pretty inconsequential but when you're holding for a long time it is something to keep in mind.

Plus if a stock kept moving sideways like that for a long time I'd start getting pretty worried

Why did you buy the 1000 shares first? If you sold short 1000 shares when you already had a 1000 share long position, all you are doing is nullifying your long position and you are essentially neutral, not long or short.

Let me get this straight so we are both on the same page. You shorted 1000 shares of a stock in which you already owned 1000 shares, correct?

No. You are essentially just selling your shares then.


Shorting is simple. Instead of buying first and then selling later, you are selling first and then buying later. The object is still buy low and sell high, just reverse the order of operations.

Good thing it's a simulation! Good luck trading!

What you have done is called a short against the box. You just did it incorrectly. This practice is not done much at the retail level so lets clear it up a tad.

To make this work on the retail level, you either need two accounts or a seperated contract account. Two accounts are less expensive.


You have two accounts. One for long term holds. One for derivatives. No margin required for a long account.

Your margin account is strictly for derivatives and shorts.

Buy 1000 long in your "cash" account.

If you believe that the stock is showing signs of weakness in the short term, but still feel confident in its long term prospects, you can short from your margin side. No need to locate, you already own the cover shares. Stock tanks 35% in a week from a bad earnings report. You buy to cover from the margin account and pocket the difference.

If the short goes against you to the degree that a margin call is made, you cover from your long account and kick yourself in the azz for a bad play.

There are other ways to cover a bad play, but you should get the idea.

This is not a good technique for emotional, new or poorly financed traders.
Splitting the difference between being a trader and an investor is difficult at best, a disaster in the making at worst. The two disciplines require totally seperate approaches that many find hard to master.



Good Luck