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Stock Short-selling

Stock Short-selling

What is Stock Short-selling and how does one go about doing it?

Short-selling Stock

Short selling is when you borrowing stocks/assets from a bank or investor hopefully at a low price. And sell it at a higher price. And buying the same stock again. Hopefully at a low price and give that stock back to the bank.

You are usually charged a borrow fee, so all parties are happy when it is all said and done.

Ex: You barrow Acme stocks at 20$ from BS banks and sell that stock for 30$ that you have anticipated. You also anticipated that it would go back down to 15$. You buy the stock at 15 and give it back to the bank.

Basically you just made 15$ for just being tricky. It is usually just experts that do this. I am just an amateur, so I am leaving this one alone for a while. If you gamble wrong then you can just as easily loose money.

Get to know a banker or other investors/brokers. Usually they will let you in if they trust you. They will ask you for money from time to time and they will make money off of you. A good honest broker will show you the charts and even educate you about what is going on. They will make you money to. Just don't get upset if you loose money. Nobody is perfect. I personally prefer people that are just getting into it themselves and that I know personally. I don't like the internet stuff as much. It is more fun for me like this. And you learn a lot. When it is all said and done that in and of it's self is worth more than money.

Or just do what most people do and go with a popular broker till you learn more about the market system (an honest one).

If you want to take a crack at it yourself you need to understand hedge funds.

Edited: Quasar on 19th Sep, 2008 - 4:34am

Stock Short-selling History & Civil Business Politics

Actually, shorting a stock is a little different than that. It kind of goes like this...

First, you believe that Company A is extremely overvalued and will decrease in value (on the market) fairly soon. This is usually about 7 days or less. You go to a brokerage house and borrow (take a short position) on Company A (100 shares @ $10 per share)for 7 days. Once you get the shares in your posession, you immediately sell them on the market. Company A gets hit with a IRS audit on day 3 and the stock DROPS to 5$ per share. You take your proceeds from the sale and buy back 100 shares @ 5$ per share then return the shares to the brokerage house and pocket the $500. So actually, you are borrowing at a high price and immediately selling it. Then hopefully buy back at a lower price, return the stocks and pocket the difference.

So easy, right?

But wait, if a particular company has a whole lot of "shorts", there is a play that the big boys can make on your position. A company had a LOT of shorts in play. That means that the people have to get there money in and out of the market within 7 days (typically). Since they have already gone short, they are committed. So if you are one of the big investors and see this, you can start buying large chunks of the stock. As a result, the price goes up on that stock. AND HERE IS THE KICKER...in seeing that, the people playing shorts will have to abandon their positions quickly and sell to minimize loss and guess what...that drives prices up even further. Then the ones that started the buying can jump out with a nice little profit. That is a call a "short squeeze".

Shorting a stock is highly speculative. You might find one that is ripe for a fall, but if there are too many "shorts" then you have to watch out for the "short squeeze".

Short-selling Stock

That sounds right. That is probably a bigger boy game.

Short-selling Stock

What is happening to gold and the forecast for possible 3k to 4k prices per ounce in the future is not actually a result of shorting gold. What has happened to gold was about the same as what happened to oil recently, but it will be more permanent with gold because it is not a consumable. There are a LOT of funds now that use gold or gold is part of the fund structure and these have been recently created and more are coming on line all the time. That doesnt sound too bad, but if you actually buy the fund, there has to be gold to back it up. That gold is taken off the free market. Of course, that makes the amount of gold for sale drop and the price will go up. Basically, these funds are creating a demand where there really isnt a demand and the result is skyrocketting prices...just like oil over the last couple years with speculator buying options on oil that they had no intentions on using.

Stock Short-selling

Short Sell Scapegoat?

As markets around the world rose and fell during a volatile financial week, it's a phrase you heard again and again: short selling. It involves making money off of something you don't own. It's not illegal, but can be risky -- and profitable. And today, the SEC put an 10-day ban, effective immediately, on short selling shares of 799 financial institutions. It's an unprecedented move that the SEC took to help shore up confidence in the markets. British regulators have also banned the practice for another 29 London-based companies. Our Nick Watt takes a closer look at the the short sell bans.
Ref. ABC Nightline