SwingTrade Member Forum

[sludgehound]

Yes if short & divy then you pay it

Long still gets divy. One more disadvantage to shorting.

Course if you are Canadian or a hedgie then can short <$5
so rarely face a divy payout. Best those can do is a non
cash divy like 15 for every hundred. Tho now & then some
thing like CWMF.pk changes their 100:15 to 100:50 and that
might bite a short.
This it is best to get some really strong trading experience
under the belt before shorting.
One good rule that I've found that holds up (in a declining
bear market) us to short the weakest stock in the weakest
sector. They fall first and hardest. Strong one goes last
and least.
Unless a hedgie, shorting takes margin account and you know
that song. Best to look for a damaging news event -- SEC
investigation, accounting "irregularities". Total best is when
CEO or CFO can't be found and left behind a wife and kids.

http://www.investopedia.com/university/shortselling/shortselling1.asp
Most of the time, you can hold a short for as long as you want. However, you can be forced to cover if the lender wants back the stock you borrowed. Brokerages can't sell what they don't have, and so yours will either have to come up with new shares to borrow, or you'll have to cover. This is known as being "called away." It doesn't happen often, but is possible if many investors are selling a particular security short.

Since you don't own the stock (you borrowed and then sold it), you must pay the lender of the stock any dividends or rights declared during the course of the loan. If the stock splits during the course of your short, you'll owe twice the number of shares at half the price.

Also, because you are being loaned the stock, you are buying on margin. In fact, you have to open a margin account to short stocks. Your broker will charge you interest on the loan and you are subject to rules of margin trading.