To establish and maintain a short position in deliverable securities, you must:
A) Sell
B) Sell and subsequently buy back
C) Sell and borrow
D) Sell, borrow and buy back simultaneously

Question

Quizplus · Accepted Answer

To establish a short position in deliverable securities, you must first sell the securities that you do not own. However, since the securities are deliverable, you need to borrow the securities to meet your obligation to deliver them at settlement. Therefore, the correct choice is option C, which involves selling and borrowing the securities. Selling and subsequently buying back (option B) is used to close out a short position, while option D involves buying back the securities simultaneously with borrowing and selling them, which is not practical or possible.

To Establish and Maintain a Short Position in Deliverable Securities