True, but still does not represent a profit by the shorter IMO. just a loan, and that is dangerous.
Again, this is not my area of expertise. Although I will likely get a margin account in the future, I have never shorted a stock. I tried once and it did not happen. I was told at the time that a margin account and options go hand in hand... never done options either. I suppose having a margin account goes with shorting a stock?
From what you are saying and to use your example, the more the shorted stock goes down, the more cash you can "borrow" from it? Maybe to invest in something else and make more money? Like Fixed Income instrument?
Hugely Risky. The expression Margin Call comes to mind, but I can see why, if that is the strategy, it works on paper.
At the end of the day, if the stock does go bankrupt, isn't there still a financial Risk due to illiquidity? That "position" of being up $10,000 on a bankrupt stock, won't fool anyone.
I wouldn't do it, but I don't know what the ramifications are either.
