Identifier: C3T8L2 · Revision: 2026-10-26 · Classification: restricted

Decision and objectives

Trace borrowed shares from delivery to repurchase and return. The decision record must connect the exposure, cash dates and implementable contract, rather than stop at a favorable price forecast.

By the end, you can trace borrowed shares from delivery to repurchase and return; separate short-sale proceeds from disposable investor wealth; calculate a short result before and after explicit charges.

Prerequisite: C3T8L1; completed Classes 1 and 2 and the Stock Market School foundation or Forex School foundation. All cases below are hypothetical; their prices, costs, rates, dates, contractual assumptions and collateral amounts are teaching inputs, not current offers.

Mechanics

A short sale sells a security the investor does not own at the time of sale. Borrowing provides deliverable securities for settlement but does not remove the obligation to return equivalent securities. The lender retains a contractual claim under the lending arrangement; the short seller owes distributions or other adjustments according to the agreement. Sale proceeds can be restricted as collateral and cannot automatically be withdrawn.

Sequence the operations: confirm borrow and restrictions, borrow/receive deliverable shares, submit a correctly marked sale, settle the sale, maintain collateral and fees, repurchase, settle the purchase, return shares and reconcile the loan closure.

Price and return drivers

Gross short trading profit = shares × (sale price − repurchase price). Deduct both trading costs, borrow fees, distribution adjustments and funding. A rise has theoretically unbounded loss per share. A borrow quote is not an execution guarantee; a recall can shorten the intended horizon.

Worked case

Hypothetically borrow 1,000 shares, sell at TRY 100 and later buy at TRY 90. Sale cash TRY 100,000; repurchase cash TRY 90,000; gross profit TRY 10,000. Supplied borrow fee TRY 800, distribution adjustment TRY 2,000, trading charges TRY 400 and collateral funding TRY 300 give net TRY 6,500 before tax. Returning 1,000 shares extinguishes the securities obligation; do not subtract their purchase value again after already deducting repurchase cash. Restricted sale proceeds remain collateral until the lender and broker release them.

Adverse case

A repurchase at TRY 130 costs TRY 130,000, producing −TRY 30,000 gross and −TRY 33,500 after the same charges. This exceeds hypothetical initial own cash collateral TRY 25,000. If repurchased securities settle after the return deadline, buying them on screen has not yet met the delivery obligation; a buy-in or penalty can follow under the agreement.

Practical use

Use a currently permitted domestic intermediary and verify eligible security, instrument-level measures, short-order marking and committed borrow for the full settlement need. The 22 September 2026 official KAP notice describes an up-tick rule until further announcement; this dated notice is not current permission for any named share. Recheck later notices and all financing/borrow terms. Reconcile broker, lending and custody records separately.

Reconcile the confirmation, position register and cash statement separately. Costs include the quoted bid/ask spread, brokerage and clearing charges, collateral or principal financing, currency conversion, custody where relevant, and exit or termination charges. A mark is not a fill. Any amount explicitly excluded below remains outside the reported result. Tax is excluded from these teaching cases: an actual comparison requires income year, investor residence and individual/corporate status, contract and acquisition dates, settlement form and effective law. The GIB guide, checked 2026-10-26, covers 2025 individual investment income, so its publication date alone does not settle a 2026 derivative liability.

Decision boundaries

A bearish forecast does not justify a short without borrow and cash capacity. Intraday repurchase does not erase the fact that an uncovered sale is a short. If borrow is unconfirmed, decline the sale rather than assume securities can be found after execution. An index future may express a different risk view but is not the same issuer exposure.

Practice and references

Exercise: 600 hypothetical shares sold at TRY 80, repurchased at TRY 74; combined borrow, funding, distributions and fees TRY 1,400. Solution: gross 600 × 6 = TRY 3,600; net TRY 2,200 before tax. A repurchase at TRY 92 instead gives gross −TRY 7,200 and net −TRY 8,600. In both cases 600 equivalent shares must be returned.

Takeaway: Calculate a short result before and after explicit charges using the actual cash schedule, with every excluded cost and remaining exposure stated.

Reference card: short-sale-and-borrow. Formula: Short sale net result. Glossary: Short sale, Securities lending. Next lesson: C3T8L3. Topic test.

Sources and verification date (2026-10-26):

Shared reference guide