Questions about shorting and buy-ins

Discussion in 'Trading' started by user83248324, Feb 24, 2009.

  1. Hey guys, thanks for taking the time to look at my question.

    I am looking at swing-shorting some ETFs which are mainly used by most long traders as day-trading instruments. My broker lists these ETFs as easy to borrow, but I am worried about the possible buy in since it does not seem many would hold them for the long term(or if they are on the easy to borrow list does it mean some trader must be holding them long term?). Also, by using common sense it would seem that if the shares would suffer a large down-turn as I would hope for, longs would possibly try to get out and thus have a buy-in on their shares and force me out of my short.

    I have tried to look up information on buy ins but am kind of amazed at the lack of information I could find.

    So, I was wondering if someone could possibly elaborate a little more on them.

    Here is what I understand so far about the process of shorting and buy-ins...

    First someone must obviously buy the shares of a stock. If they decide that they want to hold on to these shares and also want to collect a fee on them they can alert their broker that they want to allow someone to borrow them. These shares will usually be held at a third party location and other brokers can contact this party for shares to borrow. A short can then borrow these shares to short from their broker if they have shares available, and can buy them back at a lower price for a profit. But they can also suffer from a buy-in if the original buyer decided he/she wants his or her shares back, and the shorter will usually be given one trading day to exit his or her short.

    So this is the process as I currently understand it. If anything is wrong or you have any details to add please do so for the benefit of me and others.

    Now some basic questions I have about shorting and buy-ins:

    When you short shares, is it as if you are tied to one individual investor on the other end of the trade and if you receive a buy-in its just luck(actually un-luck) of the draw? Or is it more like you could be short 100 shares of a tock and all 100 shares could come from different long and you could therefore receive buy ins on a few shares at a time?
    If you suffer from a buy-in will you usually just be able to get in another short position easily if shares are still available to borrow or are there some sort of rules or regulations that prevent this
    Is there anyway you can use data, such as that on to cover, short interest vs. shares outstanding, etc) to tell how unlikely a buy-in is, or is this impossible as it is simply luck of the draw as my first question asks.

    Thanks for any help you can provide on these questions.
  2. Trade the eMini - S&P instead. You won't have to waste your time being concerned about somebody else exerting discretion over your trades. :cool: