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Saturday, July 25, 2009

#363: Margin Interest when Shorting Stock

I don't see why one has to pay interest when shorting stock if you have enough money in your account to cover the short sale? I could see maybe if the price increases to more than your cash balance why you'd be charged, but if I short $2k worth of stock and have $2k in cash in my brokerage account, I don't feel like I am borrowing to do the transaction. Sure, they are borrowing the stock from somewhere, but in return, they can have that person / entity borrow my $2k in cash to offset this. If the price fluctuation makes the stock borrowing exceed $2k, then margin interest can kick in. Severity: 2

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