Which of the following are true concerning short sales of exchange listed shares?
I. A short sale is permitted only if the last recorded change in the share's price was positive II. Proceeds from the short sale must be kept on deposit with the broker
III. Short-sellers must post margin with their broker to cover potential losses on the position
IV. The short-seller earns interest on any cash deposited with the broker that is used to meet the margin requirement

Question

Quizplus · Accepted Answer

I is false since short sale is not dependent on the direction of the last recorded change in price. II is true as the proceeds must be kept on deposit as collateral for the short sale transaction. III is true as short-sellers are required to post margin to cover potential losses on the position. IV is false as the interest earned on cash deposited with the broker is kept by the broker, not the short-seller.

Which of the Following Are True Concerning Short Sales of Exchange