Just one question. If the broker shorted his shares rather than sell his shares, why didn't he just cover with his long position. He would of course take a loss, but he would still have the original revenue from the short sale.
Example: 2000 shares bought at 10, stock falls to $9.70, he wants to bail out taking the .30 loss on 2000 shares or a $600 loss.
Later, he discovers that the stock was not sold but rather shorted. This is the same as shorting against the box. You are long a stock, you short it, thereby locking in the gain or loss at that moment. If the stock goes to the stratosphere, you cry, but you still can cover with your long position. The net difference is still that 30 cent a share differential.
Box shorting is usually done by people who, if they simply sold the stock, would have tax implications. By shorting against the box you create two open positions, neither with immediate tax liability. If the stock tanks, you might want to buy to cover, yet still hold the original long shares OR you may still just cover with the long.
Seems this guy left out some additional info. Perhaps his broker shorted more shares than he owned long?
TG |
