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Non-Tech : Datek Brokerage $9.95 a trade
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To: DAVID C who wrote (959)1/19/1997 10:23:00 AM
From: Roderick Ciferri   of 16892
 
David:

I don't think there is an expiration date to cover. When the brokerages have an inventory of stock they can play with it in different ways. I may hold 1000 shares of USRX in street name (I havent requested my share certificates) and my broker may decide to loan the shares to you for a short. In effect, the broker would sell the shares at your short price and charge you interest (because you are really borrowing the shares). If the price does not go down, and you decide to hold for the price to go down, the broker makes money from the interest he is charging you for the borrowed shares. If the price goes up enough, the broker may ask for you to put up a certain amount of cash or stock. Shorts do effect the price of a stock. When you open a short position it has the effect of a sale. When you close the short position it has the effect of a buy (buy to cover). So, large short positions in a stock will result in a depressed stock price unless it is offset by heavy buying. However, once the stock is about to turn around, the large short position is attractive to longs because it will pop the price up as shorts see the price moving up and buy to cover to lock in their gains or cut their losses.

Hope this helps,

Rod
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