that is the way I understand it. I might add to your comments though, he borrows it and immediately sells those shares he borrowed and receives the cash. He only profits from his action IF he can 'buy' and then 'return' the shares he originally borrowed and sold.
Where the 'short' comes in as I understand it (not having done it myself) is from the idea that the individual believes the stock is going down in the 'window' he has to borrow and return...can't recall what that period is either.
So, the short borrows shares and those shares are immediately sold at market. The cash is on account until settled by, within the window/due date, buying shares at market and then immediately returning those shares in the "real" owners account.
In both points in a short cycle, he does have to actually buy and sell the shares but instantaneous, therefore never really owns the shares by showing up in his account - only cash. His ownership consists of a financial agreement that he has the obligation to buy back to replace the shares he actually sold to begin with.
The cash accounts of shorts must be larger than the current obligations to the degree that they must buy even if the share price actually goes up and they have to pay out more than they initially obtained by going short. In that case they lose...
appreciate anyone correcting me if my understanding is incorrect.
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