B52T38, I'm not caught up reading so your question has probably already been answered. In case it hasn't been, the answer is algorithms can make these trades in a millisecond, both into the short position and right back out, if the pre-programmed conditions are met. It can also last days, months and even years until a company is shorted into oblivion. It really depends on the risk tolerance of whomever is shorting and what they believe to be true about the likelihood of success of the company. If they enter into a short position with the belief that the company will never make good and be successful then they may choose to short with the belief they'll never have to cover. This is a naked short where they, in theory "attempted" to locate shares to borrow and then short to the purchaser but never actually borrowed the shares. If they are willing to naked short and never borrow the shares and simply sell that which isn't theirs then they most likely never intend to cover. If a company goes belly up and their prices goes to .0001 the short never has to cover. There is also the legit short who will locate shares for borrowing and then sell those shares to the buyer. I can't remember but I think it's something like 3 day they have to return the shares by way of purchasing them and returning them to the person who loaned them (whether they realize they loaned them or not). Their intent is to sell at let's say $5.00 and then buy back at let's say $4.50. They return the purchased shares to the entity from whom they borrowed them, thus pocketing the .50 as profit for their troubles, and all in the name of "providing liquidity" to the market place. The original purchaser at $5.00 is none the wiser that they held 'borrowed / shorted' shares. For all intents and purposes, it really doesn't matter in that they, at any point, are free to sell those shares back into the market place at any time and their broker is required to ensure that they are able to do so, so long as their is a buyer willing to purchase them, whether it's the broker or another market maker.
I hope I've gotten all of that right. I'm sure I've missed a few important points but that's my basic understanding of how it works. If anyone would like to correct any of that, please feel free.
Everything I post is purely my opinion and should not be construed as advice. "The greatest obstacle to discovering the shape of the earth, the continents, and the oceans was not ignorance, but the illusion of knowledge" - Daniel J. Boorstin
