I understand what a short sale is, and I understand the risks, especially if you do it on margin. I also understand what your broker (brokerage account) might do pre-emptively if they anticipate your position is going to be, er, problematic.
But what I would like to know in a "real life, two friends talking, non-legal sort of way," is what is most likely to happen, using the following hypothetical example as a means to ask the question. I hope the "spirit" of the question is clear, and folks can respond accordingly.
Example: I have an account with a name-brand brokerage with cheap or free trades that I can do online, and the account at the moment has $25k in it, all cash, no positions held.
Let's say I want to short ACME (made-up, not to be confused with any actual company or symbol with that name, if there is one).
ACME trades for $100 per share, and I "sell" 50 shares, bringing the cash in the account from 25k to 30k.
Now, I feel confident that ACME will drop but maybe not immediately. Sure enough, ACME doesn't move very much and stays pretty close to 100 for two or three weeks and I do nothing.
In layman's terms, I would like to know what I would most likely see under the following cases:
Case 1: ACME continues to barely move for weeks, maybe months. If I do nothing, does my brokerage do anything? Am I paying them continually for "borrowing" the ACME? About how much, using the numbers in my example? Can this go on as long as I want?
Case 2: ACME starts to go up. Even if it doubles to 200, I can close my position for 10k, and I have 30k cash in the account. What will the brokerage do? Anything? Will the stock have to cost some percentage of my total account balance (or exceed it) before the brokerage forces an involuntary purchase to close my position? How long can this go on?
Thanks!