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duchessdreams | Explain short selling? |
I read about it on wikipedia but..i just dont get it.
how would someone benefit from short selling by buying from someone and then selling at lower price and then buying it back? Additional Details I starting to understand now. But why would anyone let u borrow the stock and how are they allow to sell something that is not theirs? unless borrow means something else here? |
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A nobody
|
You missing some items and you're not looking at it in chronological order,
Short selling is selling something that you don't own (or don;t want to use) with the hope of buying it later at a lower price.
You tell your broker you want to sell short,
The broker will try and borrow the stock, if they can you will be given permission to sell the stock.
You sell it at a price, and your account will be "short" the stock, since you sold something you didn't have.
If the price keeps going down, you're in good shape since you will be buying at a lower price than you sold it.,
Once you decide that you want to "close" out your short sale, you will enter a buy order to cover your short,
When the buy is made, your account will no become flat
You were short (you owed your broker the stock) and when you bought it to cover, your account went flat.
Benefits
You sell (short) the stock at 50.00 and
you buy it back at 40.00
sale = credit of 50.00
Buy = debit of 40.00
NET = $10.00 credit in your account, this credit is your profit |
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jwishz
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Doesn't get much more basic than this...
A short sale is generally the sale of a stock you do not own. Investors who sell short believe the price of the stock will fall. If the price drops, you can buy the stock at the lower price and make a profit. If the price of the stock rises and you buy it back later at the higher price, you will incur a loss.
When you sell short, your brokerage firm loans you the stock. The stock you borrow comes from either the firm’s own inventory, the margin account of another of the firm’s clients, or another brokerage firm. As with buying stock on margin, you are subject to the margin rules. Other fees and charges may apply. If the stock you borrow pays a dividend, you must pay the dividend to the person or firm making the loan.
For instructions on how to obtain short interest for individual stocks, please see Section V.10 of Key Points About Regulation SHO, which the staff of the Division of Market Regulation prepared. This document describes short sales (including naked short sales), discusses legal and compliance issues, answers frequently asked questions from investors, and provides links to helpful resources.
For additional information about selling short, please read our publications entitled Selling Short Against the Box and Short Sale Restrictions.
http://www.sec.gov/answers/shortsale.htm |
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piet lul
 |
selling a borrowed stock, in the hopes you can buy it back later at a lower price, than when you repay the stock to the original owner, you have a nice profit left,
It works only though if the price of the borrowed stock drops, should it rice you can lose a lot of money. |
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Gem
|
Technically, a short sale is when a homeowner finds a buyer willing to buy the house but for less than what is owed to the mortgage company. Of course the bank has to agree to this and many are not.
What you are suggesting is a third party who says they will "buy" your house on a short sale (thus screwing the bank out of part of your mortgage) and then turning around and selling it back to the original owner.
But, many original owner's are finding out that after the short sale they are not qualifying for new mortgage and they end up losing their house anyway.
I have heard a hundred horror stories of ways that companies are kicking homeowners when they are down and facing foreclosure. Be very leary of any "offers" to help, the company is in business to make money NOT help people.
If for you, good luck |
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mntndo
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When shorting, one sells at a higher price first and then hopefully buys at a lower price. An easier way of putting it is, one is betting the stock is going down in price. |
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Dont_taze_me_bro
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hedging |
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john carlo
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Borrow your shares from the brokerage house from their own shares of from those they hold form someone else. If the borrowed stock pays a dividend you must pay the owner. Sell the borrowed shares high and hope to buy them back to repay at a lower price. I |
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