Quick Short Selling Example
This is a basic example of how a short sale of a stock works.
You sell a stock short and get the cash. Sell Short 1000 shares @ $1 / share= $1000 in your account.
You need to go get those shares back to “cover” your trade. You borrowed them from your broker and need to give them back. Your bet is that you will be able to buy them back lower. The stock drops to $.90 / share and you buy the 1000 shares back to ‘cover’ your position. Your cost is $900. You get to keep the $100 (of the $1000) that you took in.
Make sense?
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