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Ice, I'm not an expert on shorting, like R & J, but here's what I have heard. Unlike what Rocky said a few months ago, you must short real shares, shares long in a margin account. If the long position is closed out, or the margin account is converted to a cash account, those shares are no longer "shortable" and if the institution's supply of long shares in all its margin accounts is less than the number of short shares outstanding in all its margin accounts, the excess shorts are called in. Whether it is done under FIFO, pro-rata, or some other method, I haven't heard. Sounds like pro-rata if only 20 of your 800 are being called in. I wonder too, if this isn't just a policy of some institutions to protect themselves, or if it is an SEC rule. Again, I don't know any of this for sure, it's what I've heard (and forgotten where) and filed under "sounds reasonable, but source was not authoritative enough for me to be certain". If anyone really, really knows for sure, I'd like to hear the full, correct answer. |
