4 ms·

So when you short like that there is no risk for you as a borrower other than if the assets go higher? Do you need to have enough assets to cover a x-times the

• marckhoury 4y ago
  There’s actually a lot of risk and costs when shorting. You need to pay borrow fees to borrow the stock, you need to post collateral that can be liquidated in the event that your position gets too risky, you need to post more collateral as the price of the a stock increases to cover the increased risk, and you can in theory lose an unlimited amount of money. You have to be right both about the stock decreasing in value, and the timing around when it will decrease in value. Otherwise your position might get liquidated before you can realize your possibly correct directional prediction. This is what the phrase “the market can remain irrational longer than you can remain solvent” refers to. Shorting is really hard.
  • everybodyknows 4y ago
    Missed a couple: 1. Even if the price has not moved against you, your broker can decide the stock has become more volatile, and therefore a higher collateral ratio is required. 2. Regulators can halt trading, making it at least temporarily impossible to buy back the shares and book your profit on the short sale. Hence FTA: “You never short something thinking it will go into receivership,”