Assume an investor named Erica believes that the price of General Motors (GM) will decline over the next few months and wants to profit if her assessment is correct. She calls her broker with instructions to sell 100 shares of GM short (she does not own GM) at its current market price of $30 per share. The broker borrows 100 shares of GM from Ashley, who has a brokerage account with the firm and currently owns GM (“long”). The broker sells the borrowed 100 shares at $30 per share, crediting the $3,000 proceeds (less commissions, which we will ignore for this example) to Erica’s account.22 Six months later the price of GM has declined, as Erica predicted, and is now $25 per share. Satisfied with this drop in the price of GM, she instructs the broker to purchase 100 shares of GM and close out the short position. Her profit is $3,000–$2,500 or $500 (again, ignoring commissions). The broker replaces Ashley’s missing stock with the just‐purchased 100 shares, and the transaction is complete.