Short Selling is fucking brilliant
Upon watching monday's Daily Show I became aware of Short Selling. The explanation presented in the show made no sense, so I went to wikipedia:
For example, assume that shares in XYZ Company currently sell for $10 per share. A short seller would borrow 100 shares of XYZ Company, and then immediately sell those shares for a total of $1000. If the price of XYZ shares later falls to $8 per share, the short seller would then buy 100 shares back for $800, return the shares to their original owner (paying a fee for having borrowed the shares) and make a $200 profit (minus the fee for having borrowed the shares).
How is that not fucking brilliant? As the guy in the interview said, "It's not illegal." Sure, it damaged the economy, obliterates companies, causes job losses, and brings about full financial collapse. But, still, how is it not fucking brilliant?
My only question is how one finds those original shares to borrow.
7 comments:
We can talk about the ethics of this or whatever. But I'm mostly impressed by how brilliant it is.
you can short any company at any time (there was some (temp restrictions put in place in september when the world fell apart)
the problem is that, unlike normal common shares of a stock you can not buy and sell at any point. You are locked into restrictions - and those restrictions make it a very risky investment.
as brilliant as it is - there are things called leveraged exchange traded funds (ETF) which are basically funds of shorted stocks that are leveaged. So you buy in at $10.00 a share and you are getting $20.00 worth of shorted stocks. In theory these stocks move at 2x the rate IN THE OPPOSITE direction of the contents of the fund.
an example of this is Direxion Large Cap Bull 3X Shares (BGU). I do not fully understand how some of this stuff works - other then it is all a scam.
i think you can short with any shares that are available for sale
So what do you do if the stock price doesn't drop, but increases, and the owner of said stock wants to sell and is looking for their cash, profits included?
I think one loses money in that case.
Money or Leg-Benders, that is.
yeah - if the price goes up you lose money.
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