OK, I understand the potential benefits and risks of shorting, except for one thing. If the stock Ive shorted pays a dividend, am I liable for that dividend?
Yes. If you are short as of the ex-dividend date, you are liable to pay the dividend to the person whose shares you have borrowed to make your short sale. I must say, however, that if you are correct in your judgment to sell the issue short, your profits achieved thereby will certainly outweigh the small dollar amount of the dividend payout.
