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Short Shares

Analyzing the risk profile of a short share position

Multiple Entry Prices

Just like long shares, you can short shares at multiple different prices and in various quantities. When this is the case, the average share price is the break-even. This is calculated by dividing the total credit collected by the number of shares:
Total Credit = ($X × # Xshares) + ($Y × # Yshares) + ($Z × # Zshares)
Total Shares = # Xshares + # Yshares + # Zshares
Break Even = Total Credit ÷ Total Shares
Here is what this would look like in graphical form:

Leg 1 – Sell Short 30 Shares at $X:

Figure 1

Leg 2 – Sell 20 More Shares at $Y:

Figure 2

Leg 3 – Sell 50 More Shares at $Z:

Figure 3
As you can see, these graphs look very similar to the long share graphs (just in reverse). As your average share value changes with additional legs, so too does your break even and your total risk.

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