Short sale against the box

[sachin_patel]

What is the need to borrow the stock for shorting? You already have concentrated position in the stock.
Thanks,

 

[S2000magician]

If you sell the stock you own you have to pay capital gains taxes on it.

 

[sachin_patel]

humm.. so its not really used to reduce the concentrated position I guess.

 

[S2000magician]

No, it’s used to monetize the concentrated position: to generate cash that can be used to purchase other investments to diversify the portfolio.

 

[sachin_patel]

ok got it.. thanks you!

 

[S2000magician]

You’re welcome.

 

[Viceroy]

In addition to what magician said it eliminates the security’s risk so you are neutral on the concentrated stock’s position.