SS11: R27:q6: page 284: long-short position: short position:

CFA Level III Equities
#1

wih a short positin, the investor’s liability is unlimited: here means time horizon? I could not understand "unlimited " mean… Thanks.

#2

dollars. Price can theoretically go to infinity , so liability could grow to infinity for the short

#3

Thanks!

I still could not get the point. For short position, if price go infinity, just gain 0, what the lost is just the purchase price. i still get not understand why it is a risk…

#4

when you short something you are borrowing the securities and need to pay back the securities in kind. If the price now goes to infinity … you have to pay the infinity to buy them in the open market and pay back the person you borrowed them from. (or settle in payment …)

so it is NOT 0.

#5

CPK is right , you do not purchase the security at the beginning , you just borrow and sell it. Then you have to buy it back to return it. Now figure it out .