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Strategies & Market Trends : Anthony @ Equity Investigations, Dear Anthony, -- Ignore unavailable to you. Want to Upgrade?

To: WhoLovesYa who wrote (37882)	6/7/1999 8:11:00 AM
From: Boquacious	Respond to of 122087

Please do not confuse Mr. Cody with logic and truth. His brain may explode.

To: WhoLovesYa who wrote (37882)	6/7/1999 8:56:00 AM
From: If only I'd held	Read Replies (3) \| Respond to of 122087

I'm sorry but I have to address this.... If you short a stock at 40 and cover at 10, your return is 75% If you buy at 10 and sell at 40, your return is 300%. We are talking about a return on your equity. It takes equity to play it either way. I have always said that the most you can make on a short is 100% on your equity. I have been argued with over this matter before, but I have never seen the logic from those that argued. Equity is equity, whether it is used to go long or sell short. It also requires less initial equity to go long than it does to short. The only advantage that I see is that shorting is generally more of a sure bet. Especially when you are dealing with scams. I would like to hear of just one example of how someone could have possibly gotten more than 100% on a short sale. Forget whether you are using your money or your broker's. A buck is a buck. Just a quick example. If I have $7,000 in buying power and I decide to short 1000 CYOE at 7, it will tie up 7,000 of my equity. If it goes to 0, I would have profited 7,000 or 100%. However, if I were to buy 1,000 CYOE at 7 (not in a million years for the record)with the same equity and it went to 21, ny return would be 200%. If you sold short at 21, and the stock went to 7, you would have made the same dollar amount, but the return on equity would still only be 66.6%. Simply because, as I said, it takes more equity to short at the top than it does to buy long at the bottom. As the stock goes in your favor, naturally your acct equity would grow either way. The worst part of it is that, as Mama pointed out a few posts back, it can take what seems like forever for a stock to go to 0. So the likleyhood of the average Joe holding for 0 (or 100%) is almost nil. While an investor is waiting for that issue to go to 0, he/she could be missing out on many opportunities to get a higher return on a long trade with that equity. Or by shorting in/out of several issues for smaller gains. I like to short sell when it is a pretty sure bet, but I have never bothered to hold for 0.

To: WhoLovesYa who wrote (37882)	6/7/1999 9:58:00 AM
From: Colin Cody	Respond to of 122087

Greg, Using buying power and margin does complicate the difference between short v. long, but over all an investor can use buying power of $10,000 to buy 1,000 shares @ $10 or roughly that same 1,000 shares SHORT @ $10. If the stock was GCTY and it moves to $100,000 you pocket $90,000 and in theory you put up nothing. On the other hand if it was a stock that dropped to $1.00 you made $9,000 after in theory putting up nothing. The fault in your example is you invested 400% more into your short position ($40) compared to $10 with the long position. To be fair you need to invest $40 into both investments. Good Luck! Colin