Are You Driving Down The Price Of Stocks In Your Own Portfolio?

I posted this link in a recent weekend round-up, but it’s been grating at me so much that I wanted to make sure it didn’t get lost in the shuffle, as I know round-up and weekend posts can get lost in the shuffle.

Long story short, if you have any trading accounts that allow you to trade on margin (where you can trade with more money than you have), you could be implicitly allowing shares you own to be used for short selling.

So, you buy stock XYZ hoping it will go up.  Because you have margin capabilities, your brokerage can willfully borrow your shares to another investor who wants to short that stock, thinking that it will drop in price.  Your shares, in essence, are being used against you!

And the scary part, you have no say in this matter.

Lesson learned: If you have a margin account, you may want to re-consider keeping it open.  Even if you’re not using the ‘margin’ that the brokerage is willing to lend to you, your shares could be used against you.

Pretty sweet news, huh?

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