LogFAQs > #965835404

Yes

I'm saying your broker liquidates the short position by covering but they don't just do it for free like you're implying unless you're just sitting on your money received from the broker as your proceeds from the short

If you're using your borrowed money from the short sale to buy another long asset, how then do you satisfy the margin call when you receive it? The broker forces you to liquidate something else or deposit money.

Like I don't think you're really getting it. Yes it reduces margin use, but generally the money in margin set aside to cover a short sale is being used in something else. So this whole "well you have the money set aside for this purpose" isn't really true. I mean it is in the sense that the broker needs it as collateral, but it isn't in the sense that you can just close short positions at will unless you're using no margin at all on long positions.