Arch Coal Inc. (fka ACIIQ)

[LouisDesyjr]

Why not short more?

The problem is that many/most firms have two rules that prevent or make it not worth it and there may be other problems.

1: Margin requirements. The problem is that a lot of firms will require $2.50 held as a reserve to cover the short, so a lot of money gets tied up. This reserve also may cause a person to close a trade early and pay the tax early, since they are losing the use of their money.

2: Not allowing a new short position for a stock below $5. A lot of firms will not allow a new short position to be opened on a stock that is below $5.

3: No shares available to borrow. In order to open a short, your firm needs to borrow shares from somewhere else in order to have the shares available to sell short. With a company in bankruptcy, there may not be any shares available to borrow in order to open a short position.

I tried to buy some Feb $0.50 put options, since I expect the stock will fall back to $0.20 or lower, but my firm will not execute the order.

Louis J. Desy Jr.