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If you have $10000, and you have bot 100 shares of SOHU for $80, your leverage will be .8. If SOHU drops to 5000, your balance will be $7000, and your leverage will be about 8000/7000= 1.13.

wang-lao-wu(钻石王老五)

For Short selling, you can do similar calcualtions.

If you short 100 shares of SOHU for $80 and it drops to 50, you will have a big paper profit of $3000, and your balance will be 13000, and your leverage will be as low as about .36.

If you have option positions, the calculation will be complicated.

(#54061@43)
Last Updated: 2008-10-19

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新手问题,如果SHORT必须要MARGIN吗? -ilbob(bigboy); 2008-10-19 (#54051@43)

The answer is yes. One must use margin. The point is how to manage margin. -wang-lao-wu(钻石王老五); 2008-10-19 {655} (#54053@43)
I give you an example.

If you have $15000 and you short sell 100 SKF for $130, your leverage is about .8. At this stage, you have not yet borrowed any money. Now, finance crashes and SKF jumps to 200, you will be under the water, but you will not be wiped out (You may wait for an escape).

But if you short sell 200 shares, you will be on a leverage of $1.6. When SKF jumps to $200, you will be highly leveraged (over 2) and will be forced to cover your short positions at a big loss......55555555..... After you have covered for a loss, SKF may drop to 130 again within a few days.. Then, it will take you a few months to lick your wounds.

谢谢老五,我还有问题接着请教,问题比较幼稚,别见笑.请入内 -ilbob(bigboy); 2008-10-19 {281} (#54055@43)
1) leverage 怎么计算的
2)SHORT的股票有没有在某个时间内必须COVER的说法
3)在你说的第一种情况下,MARGIN是没有用的呀,帐户上有足够的钱,"under the water", brokage 对我的帐户没有什么行动吗?没有行动是不是因为MARGIN和ACCOUNT上的钱的总数还是能COVER损失的?
4) 达到什么情况一定会被强行平仓

Ok, let me asnwer one by one. -wang-lao-wu(钻石王老五); 2008-10-19 (#54056@43)
Under the water means you have a paper loss. If you buy for 23, and the stock drops to 22.98, you will be under the water. Not a big deal. But you should not be DEEPLY under the water. -wang-lao-wu(钻石王老五); 2008-10-19 (#54058@43)
Generally speakng, you can keep your short positions as long as you like and as long as your margin can support. -wang-lao-wu(钻石王老五); 2008-10-19 {468} (#54060@43)
For some small-floating stocks, however, the broker can force you to cover your short positions. Let's me say you short sold FNM at 21. Your broker lent other people's stcok to you for short selling. When FNM dropped to $5, if those guys want to cut loss, your broker may cover your positions on your behalf.

Techincially, this is called "buy-in".

There are some reasons that can lead to buy-in. But I have not yet got into "buy-in" for a single time.
If you have $10000, and you have bot 100 shares of SOHU for $80, your leverage will be .8. If SOHU drops to 5000, your balance will be $7000, and your leverage will be about 8000/7000= 1.13. -wang-lao-wu(钻石王老五); 2008-10-19 {310} (#54061@43)
For Short selling, you can do similar calcualtions.

If you short 100 shares of SOHU for $80 and it drops to 50, you will have a big paper profit of $3000, and your balance will be 13000, and your leverage will be as low as about .36.

If you have option positions, the calculation will be complicated.
Generally speaking, there are two types of accounts: Cash and Margin. All the retirement accounts are cash accounts. If you want to short sell, you have to use margin accounts. -wang-lao-wu(钻石王老五); 2008-10-19 {568} (#54066@43)
In the margin accounts, you can do trade on so-called T+0. You have to use margin accounts. You should manage the size of your position, not to use the margin. If you have $25000, and you just trade 200 shares of MOS, or 300 shares of UYG, you are not using margin because you don't borrow any money from your broker. When your leverage is over 1, you have borrowed some money form your broker.

For IB magin accounts, it allows you to have a levarage of as high as 4 to do DAY-TRADING. That means, if you have $10000, you can buy almost 3500 shares of UYG now!
Diffrent brokers have different margin requirements. For IB, if you have 15000 and you have short sold 200 SKF for 130, they probably will cover 50 shares when SKF jumps to 180. -wang-lao-wu(钻石王老五); 2008-10-19 (#54068@43)

谢谢老五。 -rococoq(丝雨细语); 2008-10-19 (#54079@43)

If you have $10000, and you have bot 100 shares of SOHU for $80, your leverage will be .8. If SOHU drops to 5000, your balance will be $7000, and your leverage will be about 8000/7000= 1.13.

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