I have a question that I couldn't find the answer to anywhere online. Basically, I'm wondering what would happen if you short a stock and then the price increases so much that you can't afford to close it out?
For example, say I shorted 1000 shares of stock in company XYZ at $10 each, for total of $10k. Then next thing you know, the price jumps almost overnight to $1000, and now I owe $1MM. If I don't have $1MM to close it out, what would happen? Do I declare bankruptcy? If I do, who eats up the loss--the brokerage, the accounts that the shares were originally borrowed from, or someone else?
Also, how long does one have to close out a short position? In my example above, can't I just keep on waiting to close out my position, hoping the price will eventually come down? And in the meanwhile I could be investing the money I got upfront from the short sell and getting interest from it right? So it's almost a guaranteed money-maker in a sense?
Thanks so much and let me know if my questions don't make sense!
Submitted September 02, 2017 at 09:10PM by AbsolutSilencer http://ift.tt/2xGrGjw
