Question about selling short in stock marketing?

Question

After I sell short, how much time do I have to 'buy to cover'? Do I have to buy at the same day or next day?

How many days do I have to buy to cover?

Answer 1

There is no time limit except the margin call, which will require you hold a certain amount of equity in cash at all times in order to protect the brokerage.  These equity requirements can sometimes be rather complicated, so I would suggest you read some in-depth material on the subject.

Unfortunately, I don't know where you can find this (I'd rather buy puts personally), except for emailing your broker's customer service and asking them about all their shorting stock and margin requirements, as well as shorting's effect on available capital and buying power.

Btw, knowledge of margin is necessary, you are required to have a margin account in order to short stock.

Good luck.

Answer 2

There is no time limit for covering your short position. However, if the stock price is rising it may trigger a margin call. If this happens, your brokerage may be forced to initiate a buy to cover if you cannot put up additional cash or collateral securities. Also, especially in the case of thinly traded stocks, the lender may call in their loaned shares which will lead to your position being closed out if your brokerage cannot replace the "called away" shares.

Answer 3

When you sell short there is no time limit.

People cover there short position when a stock starts to move up and they start losing money.

Example:

You sell MSFT ( Microsoft at $20 per share, but you don't own the stock, you just sold it short. Your brokerage firm borrows the stock from someone else, and you will pay interest on them going out and borrowing the stock.)

MSFT puts out news that they discovered the cure for cancer and the stock starts to take off.

Every dollar it goes up you are losing a dollar because eventually you have to buy the stock and give it to the brokerage firm that borrowed it from someone else. How much can you take, the stock price goes to 28, 30. 35, 38 and you can't take anymore, you buy it to cover your short,at 39 per share, losing $19 per share. But you covered your short before it went higher.

Answer 4

Depends where you are. In the uk you could sell for extended settlement, let's say T+20 and then roll it over for another 20 days. Or trade on a CFD and just put up the margin. Or spread bet you could sell an Aug, Sept. or maybe Oct spread bet.