What is a short balance?
The short balance concerns an investor's account that has sold short shares of the company. Short sales are quite popular for many investors. An individual can open a trading account on a margin, which means that the investor can borrow money from an intermediary house that buys and sells shares for the investor. Short sales will occur when the investor sells shares that does not own, which effectively creates a short balance on his account. The investor hopes to return the money to a later purchase of shares to repay this balance. As the stock price drops, the investor earns money. Increase in stock prices will reduce the investor's profit from the investment. Not all investors can trade on a margin; It depends on their brokerage account and funds available to repay the intermediary house for the short balance. Storage supplies are more risky than buying shares, because the money loss is greater. For example, it is quite disproportionate to think that the company's stock price will drop to zero, which means inv inEstor can sell shares and reduce losses.
Investors who sell short stocks can lose their entire investment if the company's stock price goes higher than the original purchase price. This creates a significant short balance in the investor's account, which means that money is needed to pay the intermediary. While the loss of stops can help alleviate these losses, not working quickly can create a difficult investment situation.
brokerage houses use basic accounting to monitor a short balance on the investor's account. The total balance must be equal to the total number of outstanding shares multiplied by the original purchase price. Profits and losses are not necessarily published until the short balance is remedied, ie the purchase of investors inventory to cover a short position. However, if a brokerage house decides to leave an updated account, it will publish posts known as the "Mark-to-Market".These items represent a change in the price of the shares and help the indirect house to keep the cards on the total balance owned by investors. When the account is closed, any remaining debit or credit balance will represent money owed by an investor or investor.
intermediary houses often set limits for margins or the number of shares that the investor can shorten. Short sales stocks can allow investors to act unethically. Not only are they borrowing money from a brokerage company in terms of short balance, but they can manipulate the market for the spread of negative reputation about the company with which they shorted the shares. This creates a profit due to the final decrease in the price of the shares.