Wednesday, May 18, 2016

What Does “Call Away” Mean in Short Selling

We’ve recently discussed about the risks associated with short selling in our previous article. We’ve encountered the term “call away”, but do you fully understand what the term actually means? We will further tackle about that term for you to understand the meaning of that term.

Call away refers to the event wherein the lender of the security demands the trader to return the securities he borrowed as soon as possible. That basically means that the trader is forced to buy back the stocks, whether the current price is favorable to him or not. This can also cut some of the potential profits, as the trader will be forced out of his short position earlier than he expected or planned.

Being called away is pretty uncommon in financial markets, but it usually happens if the company’s stock is suddenly performing well and is continuously seeing substantial growth for a long period of time. This event might scare the lender, giving him the idea that the trader might not be able to pay the borrowed securities back should the market rises further, so he immediately “calls away” the trader.

It can also happen if the stocks the trader borrowed takes too long to reach the expected decline in price. Due to the long overdue, the lender might suddenly require the trader to return the borrowed stocks, forcing the trader to cover his short positions regardless if the current value is the price he wants or not.

As we’ve previously advised, you should first weight the risks associated with short selling before you go and start placing a short sale order. Further expand your knowledge about trading and refine your trading strategies by reading our educational articles. Find out who the best forex brokers are, visit and see!

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