Berry, I still don't understand. Maybe retired broker (if he was a stock broker) could chime in.
Short sales are REAL sales but with pretend stock How can selling a pretend stock be anything but a pretend sale?
He sells one of the shares and now has 5 guys who arelong 5 shares but he only has 4 left He has to borrow the share, correct? Borrow it from the market, not the client of record. There has to be a record of his borrowing? So far, it looks to me like the transaction is just between him and his client.. It looks like the broker has ultimate responsibility for the share being in the market. So the transaction appears to be between the broker and his client.
If he ends up with only 2 guys long 1 share but only has 1he may call you up and FORCE you to cover Then being forced to cover isn't a function of price, but the ratio of the number of people who own stock through the broker that have sold? It that's true, his client could be forced to cover when the share price goes DOWN! You could be right, but it doesn't seem right to me.
Berry, i appreciate the time you've taken to explain short selling to me. I admit that i have no expertise in this area. However, it still doesn't make sense that pretend shares could have any influence except psychological. It still looks like the transaction doesn't include the market except for the broker borrowing from the market and being responsible for the shares he borrowed.
It would be like me making a deal with a guy who owns a candy store. I think some 5 cent candy will get cheaper so i make a deal with the owner to borrow some of the candy in my name. He holds the candy and if it goes down i get to 'cover' at a lower price. If it goes up a couple pennies, i might get a margin call from the nervous candy store owner. I know it's an over simplification, but it seems to me to be what's happening. It doesn't seem to be affecting the price of candy, it's just a bet on it. |
