What is the difference between short selling and bankruptcy?
Jan Meriss Alfonso Assistant at Ascent Law LLC A short sale is the only way out of a declining stock position. However, if you are in bankruptcy, short selling may not be the right option for you. Before going ahead with this process, make sure you talk to your accountant about your options. This will make it easier for you to make an informed decision. Buying to close is the only way to exit a short position The only way to exit a short position in a bankruptcy situation is to buy back the same amount of shares as you borrowed to open the short position. In these instances, it is important to limit the amount of leverage that you use in your trading. This is called the liquidation price. This price depends on several factors, including the leverage used, the maintenance margin rate, the price of the underlying asset, and the amount of the remaining account balance. Short positions in delisted companies do not need to be repaid. These positions are worthless because the company h...