Trading short in stock is already a confusing matter for many people, but this paragraph, which there is no byline of source is directly off the SEC Investor Alerts and Bulletins page.
Who writes this stuff?
Example of a short sale.
An investor believes that there will be a decline in the stock price of Company A. Company A is trading at $60 a share, so the investor borrows shares of Company A stock at $60 a share and immediately sells them in a short sale.<-- this is actually telling nothing of what 'sells in a short sale' really means. Later, Company A’s stock price declines to $40 a share, and the investor buys shares back on the open market to replace the borrowed shares. Since the price is lower, the investor profits on the difference -- in this case $20 a share (minus transaction costs such as commissions and fees).
What defines an 'immediate short sale', who's he borrowing from and why does he go to the open market to replace shares he sold already but still borrowed?
See, more questions than answers created by a paragraph that tells one nothing from a site that should do better.
