Utah
A mutual fund, hedge fund or person can short a stock as long as they want.
If your shorting a stock using your own money (no margin money/loans from brokers etc...), you can short it for as long as you want with no interest fees.
However, if you short a stock on margin, say you have $50,000 & you short CPRK with $60,000 - you pay a monthly interest on that $10,000 margin money loan. In addition, if you short a stock on margin money & your losing money, you will quickly within 3-4 days get a margin call from your broker telling you to either liquidate your short at a loss or deposit more money in your brokerage account to cover your current loss.
Large brokerage transactions are more complex. Brokerages can get loan money from large banks that far exceed what they have in cash (to leverage on stock investments). The trading divisions at large brokerages & hedge funds tend to get out of large short postiions quickly when they start to lose money on a short, because they are paying a lot of interest money to the banks that loaned them the money. Thats how massive short squeezes originate - big money managers are losing their shirt on a large short position + interest costs - so they are forced to cover quickly or face a massive margin call from the bank that loaned them the money.
The huge market drop in 2008 was the result of many institutional investors being "long on stocks/commodities on margin money" - when the market started going down - all the money managers had to unload their long positions or face a huge margin call as the market dropped off the face of the earth.
AI
