So say I have $2000 in a margin account on ETrade, what is the maximum amount of shares I could short of a $4.00 stock? Also does ETrade have a $2.50 rule? Also this is on ETrade.
Industry rules require that investors have at least $2,000 (the minimum margin) in a margin account before purchasing stocks on margin, and that a minimum equity of 25% is maintained. This is the minimum mandated amount, and firms can and do impose higher requirements. E*TRADE’s house requirement of just 25% makes ours one of the lowest in the industry.
Is the 25% thing only when trading on margin?
Posted Dec 22, 15 8:23 PMbyChristian_A
Categories
Short Selling
Almost every broker has the 2.50 rule. I would NOT recommend using margin EVER when trading, sure trade your 2000 but don't let your losers run you into bankruptcy. You could short 500 share of the imaginary "$4 stock"
I wasn't planning on using margin I was just making sure I didn't have to have 25% of my account in cash all the time because with a smaller account I want to be able to go big when I encounter the best setups.
Thank you
Check out Tim Grittani's take on the 2.50 rule http://tradetheticker.blogspot.com/2014/02/question-what-is-250-rule.html
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