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Delivering Short |
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Delivering Short The practice of borrowing shares and using them to deliver on an option contract. For example, suppose one holds a call option on 100 shares of Johnson & Johnson. If the option writer does not own 100 shares of Johnson & Johnson if the option is exercised, he must borrow them from another investor in order to fill the terms of the option. The writer must later buy the shares on the open market in order to return the borrowed shares. This can result in large losses if the price of Johnson & Johnson increases in the meantime. See also: Short Sale.
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