Coin Citadel (CCTL)

[I-Glow]

With a margin account you can also borrow against your holdings. I know a CEO that borrowed against his stock to buy a home something like $9 million - the company was in the oil and gas sector and the oil prices started dropping and he got a margin call and was ruined.

"A margin account is a brokerage account in which the broker lends the customer cash to purchase stocks or other financial products. The loan in the account is collateralized by the securities purchased and cash, and comes with a periodic interest rate."

The stock borrowed is immediately sold - so the stock can't be used as collateral.

Here is a quick and dirty version of how shorting works.

1. You borrow 1 million shares to short from your broker - and they are immediately sold.

2. Let's say the price is $1 so you put $1 million in your account.

3. Then the price drops to $0.50 and you buy 1 million shares.

4. You repay your broker the 1 million shares.

5. So you made $500k minus broker and margin maintenance fees.

But, when shorting you can have unlimited losses - unlike when taking a long position you can only lose what you invested.

Shorting isn't for neophytes as it can go South very quickly.

And the $2.50 rule prevents shorting stocks under $2.50.

Tge SEC states any stock $5 and under is a penny stock.

IG