When you sell stock short and the price goes up, you will have to pay a
higher price for it. Therefore, to protect himself against the
possibility of losing, your broker demands a payment from you just the
same as you pay margin when you buy stock.

Short selling is something that we do not recommend very much to our
clients. We think it is not advisable to do any short selling as long as
there are good opportunities to make money by buying; but when all
bargains disappear, as they do sometimes, you must either sell short or
else keep out of the market entirely. At such times, there may be many
opportunities to make money by short selling, and we do not consider
that there is any reason why our clients should not take advantage of
them.

Of course, great care must be exercised in selling stocks short. You
might sell a stock short because you know the market price is 100%
greater than its real value, but it is possible for manipulators to
force it up a great deal higher; and if you are not able to put up
sufficient money with your broker to protect him, he will buy at a high
price and you will lose the money you have put up with him. In some
instances, stocks are cornered and the short interests are forced to buy
the stocks at prices that represent enormous losses.

It is a common thing to read about the short interests in certain
stocks. All stocks that are sold short must be bought sooner or later,
and when that buying takes place, it may affect the market very much.
Therefore, if it is known that there is a big short interest in a
certain stock, we should expect the stock to sell at a higher price; but
sometimes the short interests break the market and force the price down,
especially when general conditions are in their favor.

CHAPTER XVIII.

BUCKET SHOPS

There has been so much publicity given to bucket shops, nearly everybody
is familiar with the term. A broker runs a bucket shop when he sells
stock to his clients on margin and either never buys the stock for their
accounts, or else sells it immediately after buying it. The bucket shop
simply gets your money on the supposition that you are more likely to be
wrong than to be right. Of course, if you take the bucket shop's advice
you surely are likely to be wrong. Bucket shops get their clients into
the very speculative stocks, where there is likely to be a great deal of
fluctuation in the price of the stocks, which gives them frequent
opportunities