The $2.50 Rule The $2.50 rule is a rule that affects short sellers. It basically means if you short a stock trading under $1, it doesn’t matter how much each share is — you still have to put up $2.50 per share of buying power.
That can eat up a lot of capital.
I mean, why would a short seller put up $2.50 in buying power to short a 40-cent stock down to what … 20 cents? It doesn’t make sense. And that’s why there are not as many short sellers in true penny stocks.
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