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Technology Stocks : The New QLogic (ANCR) -- Ignore unavailable to you. Want to Upgrade?

To: Eleder2020 who wrote (18801)	10/25/1998 7:04:00 PM
From: Eleder2020	Respond to of 29386

George-Meant to delete the bottom part of the last post, after my name. Thought the first explanation was clearer but they both are saying the same thing. Ended up deleting just the last few words instead of the whole last part of the post. Now I'm confusing myself.Not a hard trick. Ed

To: Eleder2020 who wrote (18801)	10/25/1998 7:17:00 PM
From: Technocrat	Read Replies (2) \| Respond to of 29386

The reason why these short-selling scenarios never made sense to me is because I know that the stock market is a "zero-sum" game (as in "The Theory of Games and Economic Behavior", which von Neumann wrote in collaboration with the mathematical economist, Oskar Morgenstern). For every buyer you have to have a seller. If somebody makes a lot of money, another must lose it. How could a short seller be able to negotiate trades where he makes money coming and going? What chump would take the other end of the action? That would be like betting on sports games after the final scores. Now the dilution causes complications, but there has to be a rational strategy of conversion. It is very unusual to see an oscillatory behavior which creates a maximum yield integrated over time unless there is an inherit feedback mechanism. Maybe I am just too dense to grasp the magic...

To: Eleder2020 who wrote (18801)	10/26/1998 2:17:00 AM
From: George Dawson	Respond to of 29386

"When you convert your shares say at $1.16 you can sell them in the market last week for $1.75. You've just made money on your long position. Your short position is covered as collateral by the next future conversion. The only time you have to cover is on the very last conversion which really you don't have to cover because those shares balance each other out at $0. You could probably leave the short and the long out there indefinitely." Ed, I agree with you 100% on making money on the long position. I am still hung up on "covering" the short position. I think the problem is that the word "cover" here may have two meanings. In the process of delivering the prospectus to "cover" shorted shares I think it is being used in the margin account sense of putting up enough collateral to borrow and sell shares. In the short against the box scenario - "cover" takes on the more traditional meaning of buying shares at a lower price after borrowing and short selling shares of the same company to close out the position with the broker. Let's say that Ancor goes to 60 bucks a share (strictly hypothetical) and I want to protect that gain into the future. I could just go short the same number of shares. I will be hedged in that if the stock goes down $10 - I recover it from the short position. This is the zero sum gain. I can leave this in effect indefinitely, but the problem is it ties up my capital, because if it goes over $60 I am losing an equivalent amount from the short position. If I want to make money on any up trends, I need to unwind my short position-that is cover it. If I want to make money on any down trends, I need to unwind my long position. George D.