The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Baylor3217 on November 27, 2013, 10:38:23 AM
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Does one have to cover before the bankruptcy is official? Can one cover after in the link sheets?
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Ideally, you would never cover. You don't pay cap gains taxes on your short until you cover. If there is no reason to cover (ever), don't.
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Ideally, you would never short.
Fixed it for you.
To the OP, I think there are some difficulties with getting it processed, but I think you just get 100% returns in the end. I don't know the process, but I'm almost certain it exists.
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Does one have to cover before the bankruptcy is official? Can one cover after in the link sheets?
I'd be too busy doing a happy dance to worry about covering.
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Bankruptcy doesn't make the stock cease to exist. You would still have to cover, though of course the shares would be trading for maybe 1-3c each.
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Does one have to cover before the bankruptcy is official? Can one cover after in the link sheets?
If you must seek closure, wait to cover until you've reached long-term capital gains.
The original owner of the shares (from whom you borrowed) will probably write them off as worthless and won't want them back.
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Yeah but if you're paying a fee to borrow that eats your returns. I'd cover when they bottomed out at 1-3c (or whatever) unless long term status was not far away.
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Yeah but if you're paying a fee to borrow that eats your returns. I'd cover when they bottomed out at 1-3c (or whatever) unless long term status was not far away.
I've heard of paying stock dividends to the owner when you're borrowing their shares, but I've never heard of paying fees. Fidelity does that for free, and hopefully that's a standard of most brokerages.
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Why would the stock owner lend you their stock if they weren't being compensated?
https://www.fidelity.com/learning-center/trading-investing/trading/about-short-selling
"Borrower pays interest to Fidelity while position remains open"
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Why would the stock owner lend you their stock if they weren't being compensated?
https://www.fidelity.com/learning-center/trading-investing/trading/about-short-selling
"Borrower pays interest to Fidelity while position remains open"
I did it for years with Fidelity (2000-2006) without ever paying a fee. Maybe it was comped for having a certain account size or trading like a hypercaffeinated bunny.
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Why would the stock owner lend you their stock if they weren't being compensated?
https://www.fidelity.com/learning-center/trading-investing/trading/about-short-selling
"Borrower pays interest to Fidelity while position remains open"
I did it for years with Fidelity (2000-2006) without ever paying a fee. Maybe it was comped for having a certain account size or trading like a hypercaffeinated bunny.
Fees are usually paid when a stock you want to short is hard to borrow. It is unusual.
If I were short a stock taht went bankrupt, I would leave the position open until doomsday.