Short Sales

Short Sales - 4-1Short SalesShort salesSell overpriced...

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Unformatted text preview: 4-1Short SalesShort salesSell overpriced stock that you dont own and purchase it back later (hopefully at a lower price)Borrow the stock from another investor (through your broker)Can only be made on an uptick tradeMust pay any dividends to lenderMargin requirements apply4-2Margin TransactionsYou believe that the stock of Cara Corporation is overpriced and decide to sell 1,000 shares short at $80. You have posted 50% margin as required. If the stock price drops to $70 per share, what will be the percentage margin on your account?The Value of Your EquitySales of the stock: $8,000Money deposited:+$4,000The Value of the stock owed:-1000PPercentage Margin($8,000+$4,000-1000P)/1000P= ($8,000+$4,000-1000 x $70)/1000 x $70=71%4-3Exchange Market Makers in U.S.Spet is exchange member assigned to handle particular stocksHas two roles:Broker to match buyers and sellersDealer to maintain fair and orderly marketSpet has two income sourcesBroker commission, without riskDealer trading income from profit, with risk4-4...
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This note was uploaded on 01/19/2012 for the course FIN 4360 taught by Professor Davidbray during the Spring '12 term at Kennesaw.

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Short Sales - 4-1Short SalesShort salesSell overpriced...

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