A:

The short seller owes nada. Nil. Zip. Zero.



When you short sell you borrow the shares, sell them on the market, and then collect the proceeds as cash. If you wanted to get out of the position, you would have to buy back the same number of shares to repay the person (or brokerage) from whom you borrowed them. If you buy back the shares at a price lower than the price at which you originally sold them, you collect the difference - so short selling is a way to profit from a falling stock. But if the company is delisted and bankrupt, you don't have to pay back anyone because the shares are worthless.



Note: This is the best possible scenario for a short seller.



RELATED FAQS

  1. How can I evaluate if a stock is a short squeeze?

    Determine whether a stock is a short squeeze by studying the catalyst that caused the rally. Traders need to determine whether ...
  2. What is the difference between a short squeeze and short covering?

    Learn about short covering and short squeezes, the difference them and what causes short squeezes.
  3. How does days to cover a short position relate to a short squeeze?

    Learn about days to cover and how it relates to a short squeeze. Smart traders can use this metric to help them avoid getting ...
  4. What is the difference between speculation and hedging?

    Learn about speculation and hedging, the difference between them, and how traders and investors speculate and hedge.
RELATED TERMS
  1. Crowded Short

    A trade on the short side with an overwhelmingly large number ...
  2. Altman Z-Score

    The output of a credit-strength test that gauges a publicly traded ...
  3. Gross Exposure

    The absolute level of a fund's investments.
  4. Estimated Recovery Value (ERV)

    The projected value of an asset that can be recovered in the ...
  5. Recovery Rate

    The extent to which principal and accrued interest on a debt ...
  6. David Einhorn

    Known for his short selling strategy, activist investor David ...

You May Also Like

Related Articles
  1. Personal Finance

    7 Bankrupt Companies That Came Back

  2. Stock Analysis

    Are These Your Best ETF, ETN Bets for ...

  3. Trading Strategies

    Bucking The Trend With Pattern Failure ...

  4. Trading Strategies

    A Guide Of Option Trading Strategies ...

  5. Technical Indicators

    Use Volume And Emotion To Tackle Topping ...

Trading Center