Shorting and Maintenance and Margin Requirements...HELP!

[sktrad]

Hi,

Have been happily trading the NASDAQ for the past week using LEVEL II ...after learning to trade the hard way trying to daytrade the UK market!!

Anyways ..I was very confused today to find that my buying power (based on a 4:1 margin) was not what I thought it should be. Made some enquiries and apparantly its something to do with shorting the stock yesterday and maintenance and margin requirements and the result is that until the stocks settle (T+3!) I wont get my full buying power back. He said something about buying to cover shorts to ensure this doesnt happen. I mean I ended flat at the end of yesterday position wise...so dont know why I have to wait till it settles on a short, ...how come thats not the case when u go long ....and how do I buy to cover shorts to ensure this doesnt happen???

Have spent the afternoon trying to get my head round this and its given me a headache! Can someone please explain to me in layman terms just why this is happening and what I should be doing to avoid it in future.

Much obliged,

Sktrad.

 

[Trader333]

This sounds strange, who is your broker ? and are you sure you are in cash in all positions ?


Paul

 

[sktrad]

ok ...perhaps I should have gone into more detail. What seems to have happened (so I may be wrong!) ....is that the number of shares I shorted yesterday on Margin for a particular stock which was to the value of around 14,000 dollars has been subtracted from my total cash I have in the account. The remainder cash in my account minus a margin maintenance which is calculated at 30% of the 14,000 dollars is then used to calculate my new 'balance' upon which the 4:1 margin is applied. Yes, all very confusing! Anyways once this trade has settled my account will increase by the 14,000 dollars and the margin maintenance that was subtracted (so I believe!).

Yes, I had closed all positions yesterday ....there seems to be some sort of rule about this with the broker I use (to be honest I think its an SEC rule so should apply to everyone trading the US)....its just the maths is doing my head in and I want to know what I did wrong to incur this and how I can avoid it in the future!And if anyone knows why and how these figures are used and can explain the logic behind it that would be a bonus!

Sktrad