CFA Practice Question

CFA Practice Question

A short sale is possible and desirable when you expect a stock's price to ______. The uptick rule says the transaction price must be on a(n) ______.
A. fall, uptick
B. fall, downtick
C. rise, downtick
Explanation: A short sale is profitable when the price of the security falls after the sale. The uptick rule says that short sales can only be traded on an uptick. The rule went into effect in 1938 and was removed when Rule 201 Regulation SHO became effective in 2007. An uptick means that the most recent trade is higher than the trade before it, thus there is an upward trend. This measure protects the market from volatility created by heavy short selling.

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