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Strategies & Market Trends : Stock Mania ! - Mutual Funds that can short. -- Ignore unavailable to you. Want to Upgrade?

To: Tomsr who wrote (92)	5/8/1998 8:13:00 PM
From: drsvelte	Read Replies (2) \| Respond to of 129

Are you on margin?

To: Tomsr who wrote (92)	5/9/1998 2:32:00 PM
From: kahunabear	Respond to of 129

Tomsr, I am sure their are others who better understand the methods of accounting for short positions and can better answer the question. I always get confused when I try to make sense out of my brokerage statement and it has all of that mark-to-market stuff on it. But here is my opinion. If you look at it as buying the stock for $5 and selling it for $10 it looks like 100%, but I think that may be too simplistic. I think the 50% sounds more reasonable, since it seems to say $10 was originally put at risk, and you made $5 on it. Of course, with a short position, you have unlimited downside risk. Also, I'm pretty sure different brokers handle the accounting differently. I think the big difference is what balances you earn interest on, while you are short. This can effect your returns too. Well, that's my best answer. Do any others folks have a better explanation ? Thanks, WS

To: Tomsr who wrote (92)	5/10/1998 7:00:00 AM
From: Cage Rattler	Respond to of 129

Tomsr: Very interesting symantic question. Should we ask our friends at the IRS?

To: Tomsr who wrote (92)	5/11/1998 12:36:00 AM
From: S. maltophilia	Respond to of 129

You make 100%. To short a $10 stock you have to put up $5. If you had shorted 1000 shares @ 10, you would put up $5000. That puts $15000 total credit balance in your account. When you cover @ 5, you spend $5000 and you walk away with $10000, which doubles your original stake. If the fed changes the initial margin requirements, this will change the percentage returns. But, bottom line, you make $5. That's what you can spend (and share with the IRS). You can't buy groceries with percents.

To: Tomsr who wrote (92)	5/11/1998 3:46:00 AM
From: dumbmoney	Read Replies (1) \| Respond to of 129

If I short a $10 stock or mutual fund, and it goes to $5, do I make 50% or 100%? I prefer to say 50% (as in, you made 50% of the value of the shorted stock in profit). If you're trying to answer the question, "what is the return on my investment?", that's a little tricky. When shorting you invest nothing (no cash is consumed) and everything (your financial liability is unlimited). So you can't really figure ROI without getting into the specifics (how much risk am I really assuming, what is the opportunity cost of using margin, etc).