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

To: Frank who wrote (64653)	12/18/2000 9:32:48 PM
From: If only I'd held	Respond to of 122087

nope Rethink your math

To: Frank who wrote (64653)	12/18/2000 9:54:24 PM
From: smchan	Read Replies (1) \| Respond to of 122087

If I borrowed something, sold it for 12 dollars, bought it back for 3 dollars to return it to the owner..... I call that a 300 % return on investment. You're thinking about the long side. For the short, your original investment is $12 and your profit is $9, so your ROI is 9/12 or 75%. (You cannot short a $12 stock with only $3 in your account, ergo it's impossible to claim your original investment was $3.) If you're playing the long side, your original investment is $3 and your profit is $9, so your ROI is 3/9 or 300%. Sam

To: Frank who wrote (64653)	12/18/2000 10:28:51 PM
From: Michael T Currie	Read Replies (1) \| Respond to of 122087

> If I borrowed something, sold it for 12 dollars, bought it back for 3 dollars to return it to the owner..... I call that a 300 % return on investment. I call it wishful thinking.

To: Frank who wrote (64653)	12/19/2000 8:01:55 AM
From: Louis Riley	Read Replies (1) \| Respond to of 122087

Your math is wrong, as noted by others, but your post does bring up an interesting point about the maximum returns possible from short-selling. That is, the best you can ever do on a single position is to triple your capital. Assume you sell short a stock for $100. Your initial Reg T margin requirement is 50% of the sale or $50. So your capital invested is $50. Assume you hit a home run and have put on a terminal short: the stock goes to $00.01. You cover for a penny and make a $99.99 profit. Your return on invested capital? $99.99/$50.00 = ~200%. Of course, tripling your money is a fantastic return. But it pales next to the percentage returns that were available on the long side during the great Internet Mania. However, the more salient point in today's market is this: be aware that while your potential risk in short selling is unlimited, the potential reward is limited to 200%. Still, shorting has certainly been the most fruitful strategy since the beginning of Q3, and it has offered very quick returns.