posted
shorting: betting the stock loses (drops in value) rather than wins (rise in value). The short seller bets against the stock instead of with it; by borrowing from the broker's inventory as the price is starting to fall, the short seller makes money by completing the purchase of the stock nearer the bottom. Instead of buying it cheap and watching it rise, the short seller borrows it high and pays for it cheap--if indeed the price continues to fall. If the price rises, the short seller is in the unfortunate position of losing money on a stock rising in value. Naked shorting is a crime; the seller takes a short position on nonexistent shares. If I failed to be clear, I'm sorry: I just stumbled in here to the tune of China Girl--try investopedia. GL
posted
Still trying to figure how to make money on shorting.. So lets say I buy wxyz (fictional stock) its at 1.00 and I think the company sucks and it is going to drop to .50. So I put in an order to short wxyz at 1.00 and it does drop do I sell my stocks when it is finally done and I make money? I dont understand that part.. I am not going to start doing this tomorrow trust me just trying to figure it out.. I understand the buy low sell high part not the buy high sell short or how ever you would call it. Does the stock eventually have to go back up for me to make money?
How do they get away with NSS why doesnt the SEC step in and take the bastages to jail? Is it hard to prove or something?
-------------------- You wouldn't have the opportunity to be such an idiot... Posts: 577 | Registered: Nov 2004
| IP: Logged |
You borrow (temporarily) stock from your broker and sell it immediately in the market and get $5,000 for it in anticipation the price will drop... the stock tanks.. goes down down down... you buy it back cheaper then you had sold it at the higher price.. let's say you bought it all back for $1,000 and gave the stock back to your broker... the $4,000 difference is your profit...
you Sell it High and you buy it back Cheap.. you never own the stock.. its borrowed from the broker.. you make profits alot faster shorting a stock then going long but if the stock goes up instead of down when you sold it at $5,000.. you are forced to take money out from your own pocket to buy it back at a higher price then a cheaper price then you originally borrowed it at to give it back to your broker... that is how you make losses when trying to short a stock... selling it High and buying it back High... or "cover your position" in other words.. like i said your goal is to Sell it HIGH and buy it back CHEAP .. the difference when you buy it back is your profit..
-------------------- Let the world change you... And you can change the world.
Ernesto "Che" Guevara de la Serna Posts: 4669 | Registered: Mar 2004
| IP: Logged |
there is no limmit on how high a stock can go so no limit on how much money you could lose. If you short that stock for 1000 shares at a $1.00 and the next day it goes to $100 and stays there. That $1000 dollar investment just turned into a $999,000 loss.
very extreme example but just to let you know.
Posts: 734 | Registered: May 2005
| IP: Logged |
quote:Originally posted by cvrockies: Words of caution though...
there is no limmit on how high a stock can go so no limit on how much money you could lose. If you short that stock for 1000 shares at a $1.00 and the next day it goes to $100 and stays there. That $1000 dollar investment just turned into a $999,000 loss.
very extreme example but just to let you know.
That is what a daily stop/loss order is for... it covers your position in case that happens...
-------------------- Let the world change you... And you can change the world.
Ernesto "Che" Guevara de la Serna Posts: 4669 | Registered: Mar 2004
| IP: Logged |
UBBFriend: Email this page to someone!
Printer-friendly view of this topic
![[Razz]](tongue.gif)
