Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Z Best Place to Talk Stocks -- Ignore unavailable to you. Want to Upgrade?

To: Oregon who wrote (15386)	7/20/1998 5:49:00 AM
From: Larry S.	Read Replies (1) \| Respond to of 53068

"short" answers: Oregon, if you short a stock, you do indeed "borrow" the stock from someone. The stock comes from shares that are long in a margin account. When one opens a margin acct, he/she signs a margin agreement that authorizes the firm to make the stock available for shorting. (this in no ways compromises the ownership of the long). If you make 5K on the short, it is the same as making it on a long position. you are not making it on someone perse, but you are capitalizing on the change in value of the equity. If a company files for bankruptcy, you should still be able to buy back shares (as long as it is trading at some price) and "cover your short". If ELLE wears red, its probably because she's in the mood for some action. Larrry

To: Oregon who wrote (15386)	7/20/1998 8:47:00 PM
From: Iceberg	Read Replies (1) \| Respond to of 53068

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