How can I ensure that my short positions do not get forced buy ins?

Question

I have been shorting several stocks lately and i've been forced to buy to cover many of these positions lately by Scottrade.

Is there anything I can do to ensure a longer time to be able to hold these stocks?

Answer 1

Nothing will guarantee that you will not have to cover, but you can decrease the chances you will have to cover by

(1) only shorting stocks that have a large float compared to the number of shares short and

(2) switching to a larger brokerage that has more shares available to borrow.

Also some brokerages are more conservative about how many shares may be borrowed. For example, with Wachovia I have never been forced to cover a short position but I have several times been unable to open short positions because they did not have enough shares. (When I was short GM stock I was warned that I could be forced to cover, but I never was.) This makes me believe Wachovia will not allow me to short shares when they believe there is a good chance I would be forced to cover in a short time.

Answer 2

Here's how I see the next 12 months - economy and investments going down.  US and world stock markets going down.  Bonds going down.  Gasoline and commodities going up in price.  Some bounces in the markets.  It has been projected that the credit losses will be $1 trillion.  And, so far, we have only written off only $320 billion.  So, we are only a third through.  Expect some banks to fold.  GM has enough cash to see them thru 2008.  After that, ???  Now projected that the US housing market will start stabilizing in 2010.  Cut your spending and save as much as you can.  More people will be laid off.  Not good.  Many people will suffer.  And, the US govt  can do very little to help.  Good luck.

Answer 3

No, you at the the mercy of the lender and this is not just Scottrade.

You can try requesting permission to enter a short before you enter your order, rather than use the on-screen edits.

On screen edits usually just look at the firm;s lending inventory, tryying to get prior permission may force them to look to the street for lenders.

Using the street for lenders is alway  more benefical than using in-house sources.