Short seller friendly broker

15475 Views 25 Replies 10 Participants Last post by Xoron, Sep 23, 2014

Homerhomer

Discussion Starter · Jul 22, 2013

I wonder if the members could advice on short selling friendly brokers, particularly for stocks under $1, interested to find brokers that are easy to borrow and don't impose crazy high margin requirements on stocks priced under $1.

ps, the info is not for me (my risk tolerance is much lower), but was asked by someone for help in that matter and I can't think of a better place than to post a question here.

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james4beach

· #2 · Jul 22, 2013

With short selling you have to realize that to short a stock, you need to borrow the shares. So this is only possible if the broker has the shares available to borrow.

This is typically not a problem with large, liquid stocks but it's going to be much harder with stocks under $1 because these are probably micro cap stocks or penny stocks. That's difficult no matter who the broker is, so your friend might want to start to think about the feasibility of shorting these stocks to begin with.

I've been relatively happy with Interactive Brokers. I frequently short stocks there, and they even have a nice web-based tool where you can inquire whether a stock is available to short (it also tells you the interest rate, as you have to pay to borrow shares... this is a cost that is often overlooked by short sellers). I have never had problems shorting large liquid stocks, but as I said, penny stocks are a different matter.

I suggest that your friend picks a few of the stocks he's thinking of, and calls up brokerages asking them
a) if the stock is available to short
b) what is the cost of borrowing the stock short

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Homerhomer

Discussion Starter · #3 · Jul 22, 2013

Thanks James.

Further question, can the account be opened at US broker account or as Canadians we are stuck with local brokers.
I thought we need Canadian brokers but I may be wrong.

andrewf

· #4 · Jul 22, 2013

Canadians can open IB accounts.

lonewolf

· #5 · Jul 24, 2013

homerhomer

Does your friend have a strong understanding of the math ? The very best they can do on a trade is double thier money if the stock goes to zero. The risk is astronomical, The risk/reward is just not practical for trading.

If your friend wants to short stocks the most practical way that I know of is through options & the more liquid the stock & or index the better.

I think your friend is making a big mistake trying to play the greatest game ever invented by shorting stocks under a dollar.

IT IS JUST WRONG

Homerhomer

Discussion Starter · #6 · Jul 24, 2013

Lonewolf, appreciate your concern but at this time I am interested in broker info.

The person is smarter than 99% of us, and also makes more money than most of us, hence his risk tolerance or understanding of math is something I will not question.

I was simply asked to help research a broker and since my time in the short term is pretty limited I was hoping I would get some help here.

andrewf

· #7 · Jul 24, 2013

Long Term Capital Management shows that even brilliant people can be horribly wrong with disastrous consequences.

HaroldCrump

· #8 · Jul 24, 2013

Homerhomer said:
The person is smarter than 99% of us, and also makes more money than most of us

Wow, that is a lofty claim indeed !!
And this supposedly genius individual is not able to figure out which Canadian broker has best terms for short sellers?
I mean, there are less than a dozen brokerages to choose from.
Surely, the math whiz can do this....

andrewf

· #9 · Jul 24, 2013

And it's easy to prune all the big bank brokerages. IB is really the obvious answer.

Homerhomer

Discussion Starter · #10 · Jul 24, 2013

HaroldCrump said:
Wow, that is a lofty claim indeed !!
And this supposedly genius individual is not able to figure out which Canadian broker has best terms for short sellers?
I mean, there are less than a dozen brokerages to choose from.
Surely, the math whiz can do this....

Thanks for your help.

Perhaps mods can delete this thread as it is obviously waste of time, should have known not to ask any questions here, silly me.

HaroldCrump

· #11 · Jul 24, 2013

There is nothing wrong with asking questions here, and you ought to know that after nearly 3 years in the forum.
However, you can't expect to say something like : my friend is smarter than 99% of yous, and makes more money than you noobs, and not have anyone say anything.

If you still want the thread deleted, sure that is your prerogative and up to the mods if they want to delete it.

Homerhomer

Discussion Starter · #12 · Jul 24, 2013

Harold, you are better than that, you are jumping to conclusions.
Didn't say anything about you noobs, those are your words, in general majority of the population makes less than 500K, so whoever has income over that makes more than 99% or thereabouts, what's wrong with that? Is that individual smarter than most people, yes, and that's why he/she makes more money than most in a field that takes brains, and likes to delegate various tasks to others.

Not sure why I can't ask questions and expect answers to the particular questions?

My questions were actually pretty simple:
1) Can Canadian open trading account with foreign brokers (to the best of my knowledge not, but I haven't found any official document).
2) Which broker accounts fits best the particular requirements (if one can't open US broker accounts than the choices are very limited).

Thanks Andrew for your responses.

andrewf

· #13 · Jul 24, 2013

I'd say it depends on the broker, and whether they want to deal with the hassle of foreign clients. IB takes Canadian clients. They are about short-friendly as you could want. They have great margin rates.

Homerhomer

Discussion Starter · #14 · Jul 24, 2013

andrewf said:
I'd say it depends on the broker, and whether they want to deal with the hassle of foreign clients. IB takes Canadian clients. They are about short-friendly as you could want. They have great margin rates.

Andrew, you are talking about IB in Canada?, I gather they are registered in Canada, or it's the US broker that takes Canadian clients (hence different rates, requirements and so on)?
Thanks

HaroldCrump

· #15 · Jul 24, 2013

Homerhomer said:
My questions were actually pretty simple:
1) Can Canadian open trading account with foreign brokers (to the best of my knowledge not, but I haven't found any official document).

As far as I know, not without having a US residence and/or a US registered business.

2) Which broker accounts fits best the particular requirements (if one can't open US broker accounts than the choices are very limited).

IB Canada is perhaps the best choice, as others have said.
However, as a HNW client, your friend can possibly be able to negotiate good terms with TDW as well.
I can't image a situation where TDW will not be able to execute a given trade with the same accuracy and speed as IB, or not have access to an equally large inventory of shares for shorting.
The only question then remains commissions, margin rates, margin limits etc.

humble_pie

· #16 · Jul 24, 2013

HaroldCrump said:
However, as a HNW client, your friend can possibly be able to negotiate good terms with TDW as well.
I can't image a situation where TDW will not be able to execute a given trade with the same accuracy and speed as IB, or not have access to an equally large inventory of shares for shorting.

but IB has all those dark rooms
nobody has as many dark rooms as IB

(signed)
shady pastry

avrex

· #17 · Jul 24, 2013

What is a 'dark room'?

humble_pie

· #18 · Jul 24, 2013

(somewhat frivolous description of dark room) (sorry)

dark rooms are in-house pools of buyers & sellers whom the house tries to match up because it's more efficient & more profitable for the house. Usually also advantageous for the buyer or the seller.

institutional trades in thinly traded securities (such as many options) will often route directly to dark rooms so as to not disturb the visible market, ie the institution doesn't want its large number of bids or offers to show.

everyone can see the net effect of all these dark rooms - every brokerage has em - upon organized quotes emanating from organized exchanges. Because dark room B/As are not known or even disclosed; therefore the visible quoted market is not quite what it appears to be, due to hidden participation in the dark rooms.

in this link, IB says it has 8 dark rooms through which its smart routing software will march a custom option order to try to get it filled, before sending such order onwards to an exchange floor.

https://www.interactivebrokers.com/en/index.php?f=1685

To help provide price improvement on large volume and block orders and take advantage of hidden institutional order flows that may not be available at exchanges, IB includes eight dark pools in its SmartRouting logic

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Eclectic12

· #19 · Jul 24, 2013

Homerhomer said:
... , in general majority of the population makes less than 500K, so whoever has income over that makes more than 99% or thereabouts, what's wrong with that?

Is that individual smarter than most people, yes, and that's why he/she makes more money than most in a field that takes brains, and likes to delegate various tasks to others.

Maybe the individual is making their money the hard way. However, by the definition used and with few details - someone who inherits the family business and has someone else running it for them is "smarter"?

The American CEO who ground the Canadian company into the ground badly enough that the board fired him in nine months must have been a genius, considering his severance was $22 million. Somehow I doubt the shareholders saw him that way.

In any case - even if one is making top dollar in their vocation does not mean they are going to make money ... though it does sound like there's deep enough pockets not to worry ...

Homerhomer said:
... Not sure why I can't ask questions and expect answers to the particular questions? ...

Not sure why you think you aren't getting answers as IB has been mentioned in several similar threads as well as by several posters in this thread for those wanting to short and/or use options. The posts have veered off topic but there have been answers.

Cheers

lonewolf

· #20 · Jul 24, 2013

Homerhomer

My post was a little out of line my apology.

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