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Strategies & Market Trends : Shorting stocks: Mechanical aspects
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To: Q. who wrote ()6/3/1997 8:36:00 PM
From: Iceberg   of 172
 
John G, Thank you for starting this thread. I have a (hopefully) FAQ question...when borrowed shares are called in, how is it determined which ones will be called in first? Is it done on a pro rata basis, FIFO basis, or just how?

The reason I ask is that I shorted 800 JDAS a couple weeks ago at 28. It went to 30 or so, then I got a week's notice that 20 shares were subject to call in as of 28 May. That's only 20 shares (that's right... t-w-e-n-t-y!) of the 800 I shorted. Sure enough, the 20 shares were bought in at 27 7/8 last week. That left me with 780 shares. I covered those today at 25 7/8.

I found it strange that exactly 2.5% of my shares were called in. It caused me to wonder: why 2.5% ? ...and on what basis it is decided how many of whose shares get called in first?

Any comments on my experience would be appreciated.

Thanks,

Ice
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