190 THE WORK OF THE STOCK EXCHANGE 
any speculative profit in the transaction, its speculative risks 
are placed squarely up to him. 
“Short Covering.”—Sooner or later Thompson will wish 
to conclude the transaction, which from his standpoint may or 
may not have been successful. If unsuccessful, he may lose a 
part or perhaps the whole of his margin. Let us, however, 
suppose that the price of Corn Products has sunk from 100 
to go. Thompson, in order to take his profit, instructs White 
& Co. to buy 100 shares of the stock to cover his short sale 
(i.e., make his deferred delivery of stock). White & Co. 
buy the 100 shares at go and turn them over to Green, who 
promptly returns the money he has borrowed (then probably 
amounting to about $9,000) to White & Co. Thus Green, 
having recovered the stock he loaned and paid back the money 
he borrowed, is eliminated from the transaction, leaving only 
White & Co. and their customer Thompson, still involved in 
it. The debt of stock which Thompson owed White & Co. 
and which the latter owed Green, has, as we have seen, been all 
wiped out by the delivery made to Green. Thompson, apart 
from his original margin of $3,000, had a credit on White & 
Co.’s books for $10,000 (the original price of the stock), and 
after paying out $9,000 to purchase the 100 Locomotive has, 
in consequence, in addition {o the original $3,000 margin, a 
profit of $1,000 minus brokerage commissions, dividends paid 
while the short sale was still unconcluded, and stamp taxes. 
And thus Thompson's whole short sale terminates. 
Reciprocal Nature of Short Sales and Margin Purchases. 
—Some critics of stock market transactions, while conceding 
the necessity for purchasing stocks on margin, still believe that 
short sales should be forbidden. This attitude of mind is the 
more remarkable when it is realized that every purchase of 
stock on margin simultaneously causes a short sale of money, 
and, conversely, that every short sale of stock inevitably causes 
a margin purchase of money.