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Re: Mattjay11 post# 2275

Wednesday, 03/05/2014 10:05:18 AM

Wednesday, March 05, 2014 10:05:18 AM

Post# of 11618
Shorting OTC…..yes you are permitted to short them…but in practice it is almost impossible since no reputable brokerage firm wants or will permit their customers to short either penny stocks or most OTC stocks.

Such stocks are not marginable, therefore firms have problems in borrowing the stock and there are very few firms that will lend these stocks. Even if your brokerage house allowed you to try it is impossible to borrow most penny stocks, so not possible to sell short.

There are two typical sources of stock lending. Neither is available for penny stocks.

1) Institutions normally don't bother with penny stocks. If they do hold any it would not be cost efficient to lend them because the admin costs and compliance costs would be significantly higher than the $ they could earn lending them.
2) Individuals must hold penny stock positions in cash accounts. They are not eligible for margin accounts, which also means not lendable.
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