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> The broker buys 250 of the shares to sell to the person who wants to short the stock. No. The entity that wants to short will locate (or get their PB to loca
by yangyang 17y ago
> The broker buys 250 of the shares to sell to the person who wants to short the stock.
No. The entity that wants to short will locate (or get their PB to locate) shares to borrow that they will then sell, in order to short. They will pay interest on that borrow, and it can get quite expensive if that stock hard to borrow. They have to return the shares at some point - either when they decide to cover their short, or the lender recalls them.
Either way, the lender is still "betting" on the price going up, as they will get the shares back at some point in the future.
- pieceofpeace 17y agoIf the stock is borrowed it is a covered short. The problem is with naked shorts where you sell without even locating. Or when you put 'three dots' (as the Goldman Sachs compliance officer remarked in a conference) in the text field to report where you have located or borrowed the shares. In short (pun intended) selling without borrowing proves destructive for the price of shorted shares.
- yangyang 17y agoIndeed. I did read the article and I'm aware of that anyway. I was responding to the comment.
- pbhjpbhj 17y agoIt's incredible really that this was allowed to happen - if you've enough money then you're allowed to sell shares in a company you don't have any interest in (ie don't own shares of). Idiocy. Anyone want to buy Manhattan, ... the title deeds, oh I'll show you them next week.