Let's say you have reason to believe company XYZ is going to lose an upcoming lawsuit badly and want to sell their stock short. They are currently selling at $50 USD per share. You make a short sale of 200 shares. The lawsuit does go badly, their stock is selling for $35 a couple weeks later. You then have to buy back the 200 shares you sold short, which yield you a profit of $3000. Where does the $3000 actually come from?
Eric
Favorite Answer
It comes from a loss of wealth shared by the buyer who bought your borrowed stock way high
And the seller who you bought back from who sold way low
PoohBearPenguin
Comes from the brokerage. Shorting stock is basically like making a bet with your brokerage. If you win, they pay. If you lose, you pay.
tro
the company
Richard
This is a short sale. In a short sale, you actually are selling a stock that you don't really have. When you close out the short sale, you MUST buy the stock. The money comes from somebody (like a broker) who is buying the underlying stock when you "short" it.
B
loan from the broker