Hertz has filed for Chapter 11
Damn. And Rickards told me to short _Avis_. Oh well.
If you are short on something and it folds? do you lose anyway?
I can never remember which it is but longs or shorts you have to make a buy to exit at market price? or both
Forgive my lack of comprehension. I probably read it here over the years and lost the fine detail.
1. When you are short, you sell for $X and hope to rebuy it at a lower price. Your profit is $X - your buy price - fees and charges.
2. If you are short something and it folds, then it is complicated because you have sold it and still have the obligation to buy it. It may have a zero value but if it is suspended from trading then you can’t buy it. Which is awkward. So unfortunately the answer is “it depends” on the terms of the trade you entered into which is probably set out in the Exchange rules. This is a trap for young players.
I am no expert about any of this, either, which is maybe causing me to be overly confused by your explanation 2.
Let's stay with the example of a short, for now: I thought that Globb0 was suggesting a situation in which a trader wants to get out of short prior to getting force out of it (presumably a trader gets forced out when the BTC price moves too far up before the trader can close the position).
So, for the sake of attempting to learn MOAR better (hypothetical) let's also assume some terms of a recent BTC trade, let's say on May 21, a trader was convinced that BTC prices were going down to below $8,500 or lower before the BTC price goes above $9,200, so that trader enters a fairly aggressive position to short 1BTC at $8,800-ish, with a plan to close that short at around $8,500 - but will be willing to ride out such short under certain circumstances or to close such short earlier if the BTC price does not reach $8,500 as expected. So the level of confidence causes the shorter to leverage in such a way that he would be forced to close his short at $9,300 and lose his whole BTC- so feeling some confidence that he has a cushion between $9,200 and $9,300 because he does not expect the BTC price to go above $9,200 before it at least goes down to $8,500.
The BTC price ends up moving against this trader's short, and on May 23, he gets nervous that he is going to be forced to close at $9,300 and lose his whole BTC, so instead he manually closes the short at $9,250. I am thinking that he just closes and loses most of his position but not all of it. Maybe he loses 80% rather than 100%? Globb0 seemed to have been asking whether the trader has to buy into the trade to close early, but I am thinking that the trader had already put up all of the collateral that he needed, so if he decides to close early, it is just a matter of where he closes that determines how much he is going to lose, but he does not have to put any more BTC into his trade because whatever he does is already been put up as collateral.
My whole point in bringing this up, Hairy, is because I thought that your answer was only addressing the more extreme situation of being forced out of the position when I thought that Globb0 was trying to explore the extent of the negative impact on a trader (or perhaps if a trader could save himself some money) when the trader decides to close out early rather than being forced out of his position.
No I wasn't saying exit early. it was an question about the absolute. You come to exit but you cant
