Shorting a stock

The stock does not close. Instead it is halted and paid out. If the stock does not come true, then it finishes at POP$ 0.

Hope that helps.

so then what happens to my stock. If it pays out at 0 I get the monetary difference between what I shorted it at and 0
I.E: I short a stock at 35 at it finishes at 0, I get 35 per share, or do I need to cover to get the money?

You don't need to cover it. Once it pays out at $0, you get the difference. So the first half of your example is correct, you get 35 per share.

So if you shorted it at 35 then it paid out at 0, you'd be getting 70k (assuming you have 1000 shares) back to reinvest in other stocks and then the (vicious) cycle continues

Put simply when a shorted stock fails and pays off at $0. You get your investment back plus that amount again as profit. So you short a stock at $45, and you are correct and the stock fails you get your $45 investment back plus $45 profit (per share). If you shorted at $5, you would get your $5 investment back plus $5 profit (per share). Thats why I shorted google at $100.25 The way to remember, is that when you short you are actually promising to sell the market x number of shares of a stock at the shorted amount, and the market is promising to buy it at the shorted price (the money is set aside from your account to at least cover the shorted value of the number of stocks you are promised to sell. If the price goes down you are able to buy the promised stock at a lower price but the market is still required to buy them at the shorted amount. Likewise if the stock goes up you and you want to cover you have to buy the stock at the higher price, but you are selling the stock at the shorted price at the same time so you only lose the difference between the price you had to buy at and the shorted price.

For example I short stock X at $45. the stock starts to decrease to $35, I could cover (which really means I am buying a share at $35 from the money set aside and selling it for the shorted amount of $45, so I would get my entire $45 dollars back plus a profit of $10. If it dropped to $0 I would be buying a stock at $0.00 and selling it for $45.

Likewise if I shorted at $45 and the stock increased to $55 I could cover which would mean that I have to buy a share at $55 and sell it for $45 which leaves me with a deficit of $10 which the system will take from me when ever a transaction frees up $10. If I don't cover and the stock comes true and pays off at $100, I am forced to buy a share at $100 and sell it to the market for the shorted amount $45 leaving me with a $55 deficit.

Where it gets fun is if you buy long at say $10 a share on something that the market thinks is going to fail. You are risking $10 a share to earn potentially $90 a share profit if it pays off. However if you short at $10 you are betting $10 to earn $10 profit.

Likewise if you short at $90 you are risking $90 to earn $90 profit. However if you buy long at $90 you are risking $90 to profit $10 if it pays off.

David, you are really stalling on those taxes, aren't you?

does the (real) market have a really good incentive to allow shorting? it seems like it should lose money that way usually if ppl stay somewhat smart?????? or am i missing the point that ppl always will short stocks that will jump up? questionable