Assuming that an investor holds his short position until maturity and that he cannot close out his position. Will a seller that doesn't own the underlying ever enter into such a position?

  • 2
    Well the answer is "yes" and for a variety of reasons but I'm guessing there's more to your question.
    – D Stanley
    Dec 11, 2021 at 16:56

1 Answer 1


Sure - some possible reasons:

  • hedging (maybe they are a producer of the underlying but don't actually hold a financial position
  • speculation - they have a reason to think that the price of the underlying will fall
  • spread trading - maybe they are trading the price of one underlying versus the price of another

I'm sure there are other possible scenarios as well.

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