Why would a dealer have to close investors' short sale positions? - ProProfs Discuss
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Why would a dealer have to close investors' short sale positions?

Asked by Darwyn, Last updated: Oct 04, 2021

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John Smith

John Smith

John Smith
John Smith

Answered Sep 08, 2016

In order to carry out a short sale, the short seller must have stock they can borrowbecause they must sell stock in the market to initiate the transaction. if there is notstock to borrow, there can be no short sale to initiate. if the original owner of theshares you borrowed now wants to sell their shares, the dealer may not be able to findreplacement shares to help support your short sale transaction. as such, the shortsale investor would have to close the position in order to return the stock to the originalowner who wants to sell his or her shares.
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