pea fourty, re shorting
manoman, your posts is full of value judgements!
First, FLACK has a nice treatise that he reposts
from time to time about how to short... but anyone
involved in the market should understand the basic idea.
>First you borrow a stock that you don't want and immediately sell it for more than you think it is worth.
I'd disagree. First, it makes little difference what you
think it's worth. All you need is an expectation that
its price will decline. So, you can short stocks
that you think are "worth lots more". Since there is
no inherent ROI other than the price change, and
the company doesn't get anything from it, it's a trade,
not an investment, in my book - you must cash out to
realize any gain.
You may expect the price to decline because of a "market thingy", as we've had for the past year, where prices are diving on average. Or, based on some notion of "good" or "bad" or "valuation". Whatever.
>Then you root for disaster to hit that stock so
disaster? well, no - you root for something to push the
trading price down, which happens, as you have observed,
even while things go well, regardless of our hopes,
fears, or political views ;-) It could simply be a
readjustment of how folks calculate "valuation".
But when disaster is in the air already, as it has been for companies this past year, it's a losing bet that prices will rise. We typically want to use capital to make winning bets, not statements about our beliefs or our bravery. So, to make money you try to sell high and buy back lower, pocketing the difference. You repay the same
number of shares you borrowed to your creditor, who
was going to hold them anyway.
does that say it?
wow, the NASDAQ just broke below 1700, in keeping with
its chart trend. For whatever reason, people are
certainly in a mood to sell today, almost all the stocks on
my screen are red. Odds strongly favor short positions
this AM!
MfN |
