rt sale has been covered, the original sale proceeds are released from escrow, and the margin account is released. The short seller's profit is the difference between the original sales price and the amount paid for the replacement stocks. From this gross profit on the transaction, the short seller must deduct broker commissions. Additionally, if a dividend were declared on the borrowed stocks, the short seller was required to pay the amount of the dividend to the owner from whom the stocks were borrowed. These dividend payments further reduce the profit on the short sale.
Typically, short sellers do not receive interest on the sale proceeds while they are held in escrow, or on the margin accounts established in connection with short sales. Thus, the longer a short seller is required to wait to cover the sale, the
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