What happens to a short position when the company goes bankrupt?

For example, if I short company X 100 shares at $1 each and then the company files for Chapter 11, what happens to my investment?

you sell 100 shares of a stock that u have have at $1; u would have $100 in your margin account. When the company file by bankrupcy, the stock would be worthless. Let say it would trade for 2 cents; u buy it back for 2 cents to cover margins. u would have a profit of $98 minus commision and margin interest.

you can get about 10% on the dollar depending on the court and available assets, you could also end up with nothing.

you would still be able to cover your short as the stock would trade most likely for pennies or less. and you would have a big smile as you made a nice percentage gain.

Basically you werent the owner of the stock in the first place. You have the responsibility to close the position, if its still open. Chances are that it is still open, so if it is still trading go into the market and buy it back. If you dont buy it back, there maybe a situation where the company reissues shares to past shareholders and you may have to cover that position at the new share price.

You have yourself a nice profit.

you get shorted?

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