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Author: zamyatin Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 303  
Subject: Re: shorting stocks Date: 12/14/2003 3:00 AM
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The rules of the broker you borrowed the shares from in order to short them by immediately selling, will determine when you have to cover your position by buying them back and returning them to the broker. It's sort of like when you decide to borrow money from the Mafia. You're letting them decide how long they're willing to wait before they come with the baseball bats.

However, the SEC has special regulations requiring brokers to issue a margin call when an investor's losses reach a certain amount. This is to protect you from yourself, because there is the potential of unlimited losses. The same cannot be said of gains, which can only reach a maximum of 100% if the stock goes to zero, which is why shorting is generally considered a game only for the rich, the brave or the stupid.

If you are thinking about playing, I hope you are the former. (And that you stay that way by not gambling when the odds are so much against winning.)

-z.




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