diff --git a/changelog.md b/changelog.md
index 496b4a8..be2320a 100644
--- a/changelog.md
+++ b/changelog.md
@@ -17,8 +17,8 @@
   highlighted as errors.
   [#651, 81267ca3130c]
 
-- Support parameter elision in command position (e.g., `$foo ls` where `$foo` is unset or empty)
-  [#667]
+- Support parameter elision (e.g., `cd $foo` where `$foo` is unset or empty)
+  [#667, #239]
 
 - Don't consider the filename in `sudo -e /path/to/file` to be a command position
   [#678]
diff --git a/highlighters/main/main-highlighter.zsh b/highlighters/main/main-highlighter.zsh
index 6c9bc25..58ebea6 100644
--- a/highlighters/main/main-highlighter.zsh
+++ b/highlighters/main/main-highlighter.zsh
@@ -423,7 +423,7 @@ _zsh_highlight_highlighter_main_paint()
 
 # Try to expand $1, if it's possible to do so safely.
 # 
-# Uses two parameters from the caller: $parameter_name_pattern and $res.
+# Uses one parameter from the caller: $parameter_name_pattern.
 #
 # If expansion was done, set $reply to the expansion and return true.
 # Otherwise, return false.
@@ -448,7 +448,7 @@ _zsh_highlight_main_highlighter__try_expand_parameter()
       else
         parameter_name=${arg:1}
       fi
-      if [[ $res == none ]] && zmodload -e zsh/parameter &&
+      if zmodload -e zsh/parameter &&
          [[ ${parameter_name} =~ ^${~parameter_name_pattern}$ ]] &&
          [[ ${parameters[(e)$MATCH]} != *special* ]]
       then
@@ -746,8 +746,10 @@ _zsh_highlight_main_highlighter_highlight_list()
           (( in_param = 1 + $#words ))
           args=( $words $args )
           arg=$args[1]
-          _zsh_highlight_main__type "$arg" 0
-          res=$REPLY
+          if [[ $this_word == *':start:'* ]] && ! (( in_redirection )); then
+            _zsh_highlight_main__type "$arg" 0
+            res=$REPLY
+          fi
         fi
       }
     fi
@@ -1143,7 +1145,11 @@ _zsh_highlight_main_highlighter_highlight_path_separators()
   local pos style_pathsep
   style_pathsep=$1_pathseparator
   reply=()
-  [[ -z "$ZSH_HIGHLIGHT_STYLES[$style_pathsep]" || "$ZSH_HIGHLIGHT_STYLES[$1]" == "$ZSH_HIGHLIGHT_STYLES[$style_pathsep]" ]] && return 0
+  if (( in_param || in_alias )) ||
+     [[ -z "$ZSH_HIGHLIGHT_STYLES[$style_pathsep]" || "$ZSH_HIGHLIGHT_STYLES[$1]" == "$ZSH_HIGHLIGHT_STYLES[$style_pathsep]" ]]
+  then
+    return 0
+  fi
   for (( pos = start_pos; $pos <= end_pos; pos++ )) ; do
     if [[ $BUFFER[pos] == / ]]; then
       reply+=($((pos - 1)) $pos $style_pathsep)
@@ -1298,7 +1304,7 @@ _zsh_highlight_main_highlighter_highlight_argument()
       fi
   esac
 
-  for (( ; i <= $#arg ; i += 1 )); do
+  for (( ; i <= $#arg && ! in_param ; i += 1 )); do
     case "$arg[$i]" in
       "\\") (( i += 1 )); continue;;
       "'")
@@ -1385,7 +1391,7 @@ _zsh_highlight_main_highlighter_highlight_argument()
   done
 
   if (( path_eligible )); then
-    if (( in_redirection )) && [[ $last_arg == *['<>']['&'] && $arg[$1,-1] == (<0->|p|-) ]]; then
+    if (( in_redirection && ! in_param )) && [[ $last_arg == *['<>']['&'] && $arg[$1,-1] == (<0->|p|-) ]]; then
       if [[ $arg[$1,-1] == (p|-) ]]; then
         base_style=redirection
       else
diff --git a/highlighters/main/test-data/brackets-mismatch7.zsh b/highlighters/main/test-data/brackets-mismatch7.zsh
index 1caa936..7499821 100644
--- a/highlighters/main/test-data/brackets-mismatch7.zsh
+++ b/highlighters/main/test-data/brackets-mismatch7.zsh
@@ -39,7 +39,7 @@ expected_region_highlight=(
   '11 11 commandseparator' # ;
   '13 14 reserved-word' # do
   '16 19 builtin' # echo
-  '21 22 default' # $n
+  '21 22 comment' # $n - because it's unset when the line is parsed
   '23 23 commandseparator' # ;
   '25 27 unknown-token' # end
 )
diff --git a/highlighters/main/test-data/order-path-after-dollar.zsh b/highlighters/main/test-data/order-path-after-dollar.zsh
index 773c183..4b922f0 100644
--- a/highlighters/main/test-data/order-path-after-dollar.zsh
+++ b/highlighters/main/test-data/order-path-after-dollar.zsh
@@ -28,6 +28,7 @@
 # vim: ft=zsh sw=2 ts=2 et
 # -------------------------------------------------------------------------------------------------
 
+local foo='is set'
 touch '$foo'
 BUFFER=': $foo \$foo'
 
diff --git a/highlighters/main/test-data/param-argument-specials.zsh b/highlighters/main/test-data/param-argument-specials.zsh
new file mode 100644
index 0000000..2195da0
--- /dev/null
+++ b/highlighters/main/test-data/param-argument-specials.zsh
@@ -0,0 +1,38 @@
+#!/usr/bin/env zsh
+# -------------------------------------------------------------------------------------------------
+# Copyright (c) 2020 zsh-syntax-highlighting contributors
+# All rights reserved.
+#
+# Redistribution and use in source and binary forms, with or without modification, are permitted
+# provided that the following conditions are met:
+#
+#  * Redistributions of source code must retain the above copyright notice, this list of conditions
+#    and the following disclaimer.
+#  * Redistributions in binary form must reproduce the above copyright notice, this list of
+#    conditions and the following disclaimer in the documentation and/or other materials provided
+#    with the distribution.
+#  * Neither the name of the zsh-syntax-highlighting contributors nor the names of its contributors
+#    may be used to endorse or promote products derived from this software without specific prior
+#    written permission.
+#
+# THIS SOFTWARE IS PROVIDED BY THE COPYRIGHT HOLDERS AND CONTRIBUTORS "AS IS" AND ANY EXPRESS OR
+# IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
+# FITNESS FOR A PARTICULAR PURPOSE ARE DISCLAIMED. IN NO EVENT SHALL THE COPYRIGHT HOLDER OR
+# CONTRIBUTORS BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, SPECIAL, EXEMPLARY, OR CONSEQUENTIAL
+# DAMAGES (INCLUDING, BUT NOT LIMITED TO, PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES; LOSS OF USE,
+# DATA, OR PROFITS; OR BUSINESS INTERRUPTION) HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, WHETHER
+# IN CONTRACT, STRICT LIABILITY, OR TORT (INCLUDING NEGLIGENCE OR OTHERWISE) ARISING IN ANY WAY OUT
+# OF THE USE OF THIS SOFTWARE, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGE.
+# -------------------------------------------------------------------------------------------------
+# -*- mode: zsh; sh-indentation: 2; indent-tabs-mode: nil; sh-basic-offset: 2; -*-
+# vim: ft=zsh sw=2 ts=2 et
+# -------------------------------------------------------------------------------------------------
+
+local s='`foo`'
+
+BUFFER=$': $s'
+
+expected_region_highlight=(
+  '1 1 builtin' # :
+  '3 4 default' # $s
+)
diff --git a/highlighters/main/test-data/parameter-elision-argv.zsh b/highlighters/main/test-data/parameter-elision-argv.zsh
new file mode 100644
index 0000000..fd030cb
--- /dev/null
+++ b/highlighters/main/test-data/parameter-elision-argv.zsh
@@ -0,0 +1,37 @@
+#!/usr/bin/env zsh
+# -------------------------------------------------------------------------------------------------
+# Copyright (c) 2020 zsh-syntax-highlighting contributors
+# All rights reserved.
+#
+# Redistribution and use in source and binary forms, with or without modification, are permitted
+# provided that the following conditions are met:
+#
+#  * Redistributions of source code must retain the above copyright notice, this list of conditions
+#    and the following disclaimer.
+#  * Redistributions in binary form must reproduce the above copyright notice, this list of
+#    conditions and the following disclaimer in the documentation and/or other materials provided
+#    with the distribution.
+#  * Neither the name of the zsh-syntax-highlighting contributors nor the names of its contributors
+#    may be used to endorse or promote products derived from this software without specific prior
+#    written permission.
+#
+# THIS SOFTWARE IS PROVIDED BY THE COPYRIGHT HOLDERS AND CONTRIBUTORS "AS IS" AND ANY EXPRESS OR
+# IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
+# FITNESS FOR A PARTICULAR PURPOSE ARE DISCLAIMED. IN NO EVENT SHALL THE COPYRIGHT HOLDER OR
+# CONTRIBUTORS BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, SPECIAL, EXEMPLARY, OR CONSEQUENTIAL
+# DAMAGES (INCLUDING, BUT NOT LIMITED TO, PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES; LOSS OF USE,
+# DATA, OR PROFITS; OR BUSINESS INTERRUPTION) HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, WHETHER
+# IN CONTRACT, STRICT LIABILITY, OR TORT (INCLUDING NEGLIGENCE OR OTHERWISE) ARISING IN ANY WAY OUT
+# OF THE USE OF THIS SOFTWARE, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGE.
+# -------------------------------------------------------------------------------------------------
+# -*- mode: zsh; sh-indentation: 2; indent-tabs-mode: nil; sh-basic-offset: 2; -*-
+# vim: ft=zsh sw=2 ts=2 et
+# -------------------------------------------------------------------------------------------------
+
+BUFFER=$': $foo ${bar}'
+
+expected_region_highlight=(
+  '1 1 builtin' # :
+  '3 6 comment' # $foo
+  '8 13 comment' # ${bar}
+)