This is exactly what can happen to a short when the short is a legit short that borrows 2000 CYDY and sells at 5$
Total $$ needed to be deposited before the trade; are exactly 5000$. That is 50% of the short the same %% if you bought 2000 shares on margin.
Remember, think in reverse to everything that a long would know. This is strange stuff.
CYDY moves quickly to 10%
The Broker has computers doing this today, in my brokers days we did this by calculator. Want a laugh? I bought the first calculator. Prior to that I carried a slide ruler.
So, CYDY is now 10$ and you Mr. Smart Short have 5000$ cash in the account.
To calculate the margin call there is still that pesky 5000$ left hanging.
But because CYDY ran to 20$ your new Debit Balance is now 15,000$
Mr. Smart Short decides that Adam F has Left him holding the short straw and runs.
That means Mr. Short must add PRIOR to buying in the short; 10,000$.
Lets say that takes a day. It would. Wired funds on the West Coast are not confirmed by Banks and Brokers; at times, until 3 to 5 PM Pacific time. What happens if CYDY pops to 23$ the next day. MR. Smart Short needs more cash to buy all. He can buy most with the 15,999$ wire.
Isn't being a short fun. I just love this story with a happy ending.
P.S. Shorts should never select a broker above the 4th floor. A fall from that height would be fatal.
Might it be the proper time Mr Short, to be independent and cover prior to Mr. Left and Adam F.?? Would you be happy to be Left holding the bag while they exit stage left? It will happen.
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