Canadian Securities Course (CSC) Level 1 Practice Exam

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Is there a time limit on short sales?

No, the position will remain open as long as the client wants, or unless the stock gets delisted.
Yes, short sales must be closed within 30 days.
Short sales must be closed at the end of each trading week.
Short sales must be closed within the same trading day.

The correct answer is: No, the position will remain open as long as the client wants, or unless the stock gets delisted.

The correct answer emphasizes that there is no inherent time limit on short sales, meaning that a short position can remain open indefinitely as long as the investor chooses to maintain it. This allows traders to take advantage of potential downward price movements in a stock over a longer timeframe without the need for an immediate exit. The only exceptions that might impact the duration of a short sale are external factors such as the stock being delisted or actions taken by the brokerage, which may demand settlement or close positions under specific circumstances. This highlights the flexibility that investors have when managing short positions, contrasting with other forms of trading that may have stricter time constraints. Understanding this concept is crucial for investors considering short selling, as it impacts their trading strategies and risk management approaches, allowing them to align their short positions with their market outlook and objectives.