Short Sale in the Stock Market Game
In The Stock Market Game the money obtained from a short sale is not added directly to a team's cash balance. Instead, the value of the stock sold short is "marked to market" at the end of each day. This means the value of the stock sold short is updated to the latest price at the end of the day. If this price dropped as the short seller hoped, the gain is realized at that time and then added to the team's cash balance. If the price rises, however, the loss is subtracted from the team's cash balance.
For example, suppose a team sells short 100 shares of Droopy Inc. at $20 per share. Here is the outcome at the end of the first week if the stock's price falls as expected:
Value of original short sale 100 x $20 = $2,000
Subtract value at end of week
If Price falls to $15 100 x $15 = $1,500
Gain on short sale (added to
cash balance) $500
What if Droopy's stock's price increased to $25 per share? In that case, the team would have subtracted from its cash balance.