Spider Resources

That is correct. Since the shares you buy through a broker are not held in your name, the brokerage is able to "lend" your shares out to someone who wants to short trade them. However, if you have a sell order pending (at a much higher price), then that share can't be loaned out, as it would create illiquidity for the brokerage, meaning that they would have to borrow the shares from another brokerage or clearing house in the event your sell order went through.

For more information, here are a couple of links:

http://beginnersinvest.about.com/cs/...

http://en.wikipedia.org/wiki/Short_s...

Hope this helps.