Shorting stocks: Mechanical aspects Message Board

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Strategies & Market Trends : Shorting stocks: Mechanical aspects

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To: Daniel Chisholm who wrote (150)	9/24/1998 12:19:00 PM
From: dumbmoney	Read Replies (1) of 172

The case for some investors may be even stronger than you suggest. For one, big fish earn interest on the short account (mark to market value). This is in some sense "free money". And the tax issue is really significant for people in the 40% bracket (all short profits are considered short-term and do not qualify for favorable cap gains treatement). Of course, this assumes a very high comfort level with the short position. In some cases this is truly a no-brainer (consider the infamous COPY), but usually there is substantial risk involved. A lot of people make glib assumptions about the cost and returns of shorting, but it's actually pretty tricky to figure.

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