In general, when you short a stock, you make money of the stock's performance declines - and the more it declines, the better you do. My question is, is it possible to get burned because a stock's performance declines too much? If the company goes out of business, or gets their trading symbol pulled, what happens to traders who are short that stock?
No problem at all. The busted stocks just trade on the pink sheets with a new symbol. You can cover the short anytime you want to.