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To: Q. who wrote (279)	5/19/1999 9:52:00 AM
From: afrayem onigwecher	Read Replies (3) \| Respond to of 1440

:If you short a stock at $40, you're betting it will drop. But what if that stock zooms to $500? You owe $460 for every share you shorted! Q. ''What exactly is a 'sell short'?'' -- Kin C. A. Don't let the lingo fool you. Sell short is just another way of describing shorting a stock. In a nutshell, you either expect a stock price to go up or down: You can place your bets accordingly. Buying a stock (betting it'll go up) is referred to as being 'long' in a stock. Conversely, betting a stock will drop is a 'short.' When you short a stock, you are technically borrowing shares from another account, promising to 'buy back' the shares for that account when you are done with them. You are selling a stock before you buy it. Your goal is to buy the shares back for that account at a much lower price. EXAMPLE: You sell short 100 shares at $10 a share. The price drops. You buy 100 shares a week later for $7.50 a share. You make a $2.50 profit - about a 33% return. Like this Article? Alas, shorting isn't that easy! In fact, it's tricky. For starters, while you can only lose all of your investment when you buy a stock, when you short a stock, you have unlimited exposure. EXAMPLE:If you short a stock at $40, you're betting it will drop. But what if that stock zooms to $500? You owe $460 for every share you shorted! Another pointer: If you're investing in a stock, you shouId gauge the level of 'short interest' in it. The 'short interest' tells you how many shares are being shorted by other investors. If 20% or more of all shares outstanding in a company are being shorted, it could trigger a 'short squeeze.' What's a short squeeze? It's when a company releases positive news that could send the shares higher, scaring off short investors who are afraid the stock will rise. At this point, all the short investors rush at the same time to 'cover' their short positions. And since those short investors have to buy back shares that were borrowed, they act as if they are additional buyers of the stock. With all of those buyers pouring into the stock, shares are artificially 'squeezed' higher. How can find how large the short position is in a company? Various web sites will tell you, including Nasdaq.com. Thanks for your question, David Sterman Director of Online Research iionline.com