Anyone see this story about CYNK?

comical as hell....talking heads at CNBC were going ballistic over it around lunch today...as if the 'real' market is absent of this sort of manipulation

Imagine if you bought at the bottom

suspended today

12% margin will seem small when the stock drops 99% over the next week.

The guy that's short is in a really, really good position. I'm not sure why his margin rate is 12%. Usually brokers give the ability to short to larger accounts with better margin credit. Odd deal. I'd guess an average margin rate should be under 5% for a trading account of any size, and no way a broker lets a guy trade who is worried about paying margin interest.

In any event, the lending broker will eventually zero out the receivable, and the guys stands to make some decent money predicated on his paying the interest.

He needs to think it through. Or if he can't carry the interest, both he and Scott Trade need to rethink why he is marginable and why the trade was allowed.

If you short you'd be borrowing both the security and cash.

On shorts, you'd have both a Fed and House requirement. The house is usually more conservative than the Fed. Rates are solely determined by brokerage firm and based on size of account and credit risk. Individual securities have individual margin requirements based on a number of things, both Fed and house again.

So as an example my trading account indicates 100% margin equity currently. If I shorted a stock, a number of things change including, but not limited to, total market value, purchasing power of both marginable and non-marginable securities, available to withdraw, net cash/margin balance, margin equity and margin equity percentage.

Unless he has portfolio margin. But I doubt it at 12%.

He's lucky he's with Scott Trade which is a fairly basic site. If he was with IB, they could, and might start immediate liquidation.

In the case of CYNK you'd be borrowing cash. When you short a stock like this, they use non marginable available cash as reserve to guaranty a buy to cover. You sell. Your account gets credited the short sale proceeds. Immediately there is a 100% margin requirement on this security. And it's up the the broker how to apply it. CYNK would be applied in cash at over 100%. You either have the cash to buy to cover, or they lend it to you using your marginable securities as collateral.

IB is about the most sophisticated trading account a retail investor can have. They start portfolio margin at the 100K level. I went in to their margin calculator and figured it up for CYNK. Cash would be borrowed. More so in my e-trade account where they want 10X, but in both cases cash is either made unavailable, or monies lent on the short sale to cover the buy to cover.

Go ahead and get online and go to your broker's margin calculator. Enter a potential short sale on CYNK. See what happens to your net cash/margin balance on a $1,300 short sale for a stock like this.

Theory -v- Practice. In theory you borrow shares only. As a practical matter, since your broker needs to put up 102% cash equivalent as collateral, and sometimes you get a rebate of the fees accrued, at least I do from IB, you are required to put up cash, or cash equivalents.

For almost all retail investors when they short they are borrowing cash and shares. You don't pay interest on shares borrowed you pay fees. Your charges are expressed in interest because there is a cash component to it.

Again, go to your brokers margin calculator if you have a margin account, and enter a short for CYNK. Pay close attention what happens to your cash balance.