Oregon, Larry did a nice job answering your questions [please see his post # 15389]. I would just like to add a few comments.
Keep in mind that when you short a stock, it is a transaction based upon borrowed shares. As such, the shares are subject to being recalled by the broker who loaned them to you to sell! For example, I once shorted 400 shares of a stock [ticker JDAS], and after a few weeks I was notified by the broker that I had 3 days to liquidate 30 of the 400 shares. Fortunately that wasn't too big of a deal. So it's possible [though unlikely] that all of your borrowed shares could be unexpectedly recalled, and it might happen at a time when you were in a losing short position. Beware.
Larry indicated that if you make money on a short, you aren't making money off "someone perse", but off the difference in value of the stock. My understanding is that if you make money on a short, then the owner/s of the stock whose shares were loaned out lose money on their long postion to the extent you make money on your short position. They would have lost it anyway, however, due to the price differential of the stock. So you really wouldn't be taking anyone else's money "perse" - as Larry says - at least by virtue of having shorted. But obviously someone does lose money when they are in a long position and the stock price goes down, the same as someone who shorted loses when the stock price goes up.
All this is, as I mentioned, my understanding. I could very well be wrong as I'm definitely not an expert on the fine points of how brokers operate. Perhaps Larry or some of the others can add to, or make corrections to what I've said, if I'm off-base.
BTW, I tend to agree with Larry about Elle in red. Yellow is my favorite color though. <g>
Ice |
