Allen Gold thought Exxon s common stock was far overpriced at
Allen Gold thought Exxon’s common stock was far overpriced at $45 a share; therefore, he executed a short sale on 100 shares. How did his stockbroker assist in arranging this short sale, and how much profit (ignore commissions) will Al make (or lose) if:
(a) Exxon goes down to $40 a share,
(b) It goes up to $50 a share?
Does Al have to put up any money for this short sale? Would you recommend short selling as a routine practice over the long run? Explain.
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