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Richard | What does short selling stocks mean? |
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collegenebula
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Yes you make money if the stock goes down but... .
What you are doing is basically telling someone that you have shares of stock that you borrow and then buy back, which is called covering, now at a lower price (hopefully) Thereby making money when you sell them.
Here is the wikiquote:
"Typically, the short-seller will "borrow" or "rent" the securities to be sold, and later repurchase identical securities for return to the lender. If the security price falls as expected, the short-seller profits from having sold the borrowed securities for more than he later pays for them but if the security price rises, the short seller loses by having to pay more for them than the price at which he sold them."
they say that it is risky because there is no bottom line as there is when you are buying long.
If a stock is bought long, which is what most people do, the worst that could happen is that you lose all of your money when it hits 0... In short selling, the stock can go up indefinitely so you could end up owing more than your original short selling goal I guess you could call it.
Say you short freddie mac that is at a dollar and you want to use ten dollars, so you short ten shares. It goes down to 50 cents and you now have 15 dollars... 50 cents is 50% of one dollar. THat is the gain here. but if it goes up to 2 dollars, that is a 100% increase, so now you not only owe the guy for your first ten shares, but you owe him ten shares at 2$ a piece or $20 worth.
Let me know if this helps. |
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Xavier Z
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4 Steps:
1. You convince someone to lend you their stocks at a set interest rate.
2. You sell the stocks immediately when stocks prices are falling.
3. You buy the stocks back when the prices have fallen a lot.
4. You give the stocks back to the original owner along with interest.
Your profit comes from the different of the stock prices when you sold it and bought it minus the interest.
It's very risky. |
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aurora1273
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Basicly you are making money on betting a stock will go down with in a short period of time.
Short selling is the selling of a stock that the seller doesn't own. More specifically, a short sale is the sale of a security that isn't owned by the seller, but that is promised to be delivered. That may sound confusing, but it's actually a simple concept. |
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STL Biker
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You have your broker sell someone elses shares and you hope the price of those shares will fall so you can buy them back at a lower price and retain the profits. |
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CJC
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Not sure I am going to answer your question, but I perceive your question to be related to buying stock on the stock market.
To "short" a stock, means you have the belief that the stock price will go down. I'll provide an example to explain it:
Say company A has a stock price of 100. You believe this will go down to 80. You go the market and borrow 10 shares from someone who owns them and sell them back to them later on. You sell the shares immediately at 100 and currently have $1000. The stock price falls to 80 and you decide to return the shares to that person. To do so, you must buy 10 shares at 80, which costs you $800 and you profit $200 as a result.
If there are a lot of 'shorts' in the market, it tends to drop the price of the stock - this works through the basic Supply and Demand theory. Shorting stock, as mentioned in the example, means you borrow and SELL shares - resulting in a drop in demand. That's why not too long ago, selling short was banned in the market - with fears that the stocks would drop even further (stocks have dropped considerably since, so I dont know what good that did).
The problem with selling short - is that if the price goes up, you could lose unlimited amounts of money, since you have to buy back those shares eventually. (If the price of the stock went up to 200 in the earlier example, you would be out $1000). |
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jack b
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Basically, you say "I'll sell you this stock in one week for $5 a share". Someone who thinks it will go up says "I'll take 5000 share next week at that price. In one week the stock goes down to $4 so you buy it at that price and sell it to the guy who has the contract with you to buy it at $5. |
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Casey H
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not meny left in stock i think |
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