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#1
10-06-2006, 03:27 PM
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simple question from a total noob... Def: shorting it?
What does "shorting it" mean?
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#2
10-06-2006, 03:43 PM
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Re: simple question from a total noob... Def: shorting it?
The effect is the opposite of buying a stock (which is called being "long" in the stock). If you "short" a stock, you make money when it goes down in price.
The way this works is that you borrow someone else's shares, sell them, then if the price goes down, you can buy them back, pocket the difference, and return the shares. I suggest checking out investopedia. eastbay
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#3
10-06-2006, 04:22 PM
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Re: simple question from a total noob... Def: shorting it?
you are also responsible for any dividend, and may be forced to buy it back at any time your broker demands.
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#4
10-06-2006, 04:24 PM
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Re: simple question from a total noob... Def: shorting it?
And the most important difference, in my opinion is risk. When you buy a stock, you are risking how ever much you buy. So if you buy $100 in stock A, and it plummets a la enron, you lose $100.
If you short a stock, and it sky rockets, there is no limit to what you might owe. A big mistake in buying a stock results in 100% loss. A big mistake in shorting a stock may result in much much worse percentages.
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#5
10-07-2006, 01:44 AM
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Re: simple question from a total noob... Def: shorting it?
That's offset by the fact that when a stock is garbage, it's just about guaranteed to tank sooner or later. If a stock is good, it may go up a little or a lot or not at all.
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#6
10-07-2006, 02:26 AM
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Re: simple question from a total noob... Def: shorting it?
[ QUOTE ]
And the most important difference, in my opinion is risk. When you buy a stock, you are risking how ever much you buy. So if you buy $100 in stock A, and it plummets a la enron, you lose $100. If you short a stock, and it sky rockets, there is no limit to what you might owe. A big mistake in buying a stock results in 100% loss. A big mistake in shorting a stock may result in much much worse percentages. [/ QUOTE ] If you're stupid enough to let your risk be bounded by stocks going to zero or infinity, that is. eastbay
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#7
10-07-2006, 02:28 AM
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Re: simple question from a total noob... Def: shorting it?
[ QUOTE ]
you are also responsible for any dividend, and may be forced to buy it back at any time your broker demands. [/ QUOTE ] Don't forget that you could also get hit by a bus while holding stocks short. Seriously, though, I've never had a short called in and I've held many short positions. How often does that really happen? eastbay
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#8
10-07-2006, 12:28 PM
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Re: simple question from a total noob... Def: shorting it?
i've been short 132 times in the last four years, and was called twice. two different brokers.
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#9
10-08-2006, 05:34 AM
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Re: simple question from a total noob... Def: shorting it?
[ QUOTE ]
[ QUOTE ] you are also responsible for any dividend, and may be forced to buy it back at any time your broker demands. [/ QUOTE ] Don't forget that you could also get hit by a bus while holding stocks short. Seriously, though, I've never had a short called in and I've held many short positions. How often does that really happen? eastbay [/ QUOTE ] A lot more often than I would like. If you are short something like Intel or GE where there's a ton of stock out and a borrow is never a problem, it's not going to happen. If you are short a garbage stock, lots of other people want to be short too, the borrow gets tight, and buy-ins happen from time to time.
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