Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 2
Hi,

I'll take a stab at it. If you're shorting, it's probably on margin (I don't know if they changed it,but it was 50% of what you wanted to borrow) and have other assets to back your short position. In other words, you may have a naked short of xyz stock but own enough abc stock to cover the loss. Margin calls don't happen all that often, but if the broker thinks there may be a problem with the share re-purchase, they will do a margin call and the short seller would be forced to sell other stocks, bonds or assets to cover the loss.


In any event, should the worst possible case happen, the broker will buy back the shares (replacing the borrowed shares used in the short sale) and go after the short seller's assets to cover the loss.

J.P.
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.