Shorting and Bankruptcy

[riteshbafna]

Hi all,

If I short a stock and if the company goes bankrupt, what happens to the shorted stock? I mean do I have to cover? I am guessing not, but then what am I supposed to do?

Thanks

[fafafa]

good question

[Canada]

Hi all,

If I short a stock and if the company goes bankrupt, what happens to the shorted stock? I mean do I have to cover? I am guessing not, but then what am I supposed to do?

Thanks

I am not a guru about trade business, but what I think, to do a short you must need a short account (marginal account). You are borrowing money from your broker, so you have to pay back to your broker. So stock company doesn't have anything to do about this. I think this will help you, or someone more knowledgeable about this will post a better explanation I hope.

More information, ask our best friend WIKI

Short (finance) - Wikipedia, the free encyclopedia

[riteshbafna]

Well, I know that I need margin account and how the whole thing works. I just need to know what happens if the company goes bankrupt.

Thanks

I am not a guru about trade business, but what I think, to do a short you must need a short account (marginal account). You are borrowing money from your broker, so you have to pay back to your broker. So stock company doesn't have anything to do about this. I think this will help you, or someone more knowledgeable about this will post a better explanation I hope.

More information, ask our best friend WIKI

Short (finance) - Wikipedia, the free encyclopedia

[mmgdc33]

I actually wondered about the same thing a while back. This article pretty much states what I was assuming at that time.

http://www.davemanuel.com/2007/08/19/what-happens-if-a-stock-that-i-am-short-goes-bankrupt

As far as being forced to cover immediately, that part I don't know, and the article doesn't address.

[Canada]

I actually wondered about the same thing a while back. This article pretty much states what I was assuming at that time.

http://www.davemanuel.com/2007/08/19/what-happens-if-a-stock-that-i-am-short-goes-bankrupt

As far as being forced to cover immediately, that part I don't know, and the article doesn't address.

OK this article is interesting and explanation was also good. If I knew this before I would have bought old GM stock, because everybody was sure about the bankruptcy of GM. We missed that

[riteshbafna]

You would have bought? or shorted GM stock?

OK this article is interesting and explanation was also good. If I knew this before I would have bought old GM stock, because everybody was sure about the bankruptcy of GM. We missed that

[ghetta316]

I bought a stock that eventually went bankrupt. Its still sitting in my scottrade account at .0006 cents, and every now and then the value changes for some reason. I suspect that if you shorted a stock, you could always buy shares to complete the cycle, even if the stock is selling for .0001