shorting stocks, who loses?
- Thread starter z32000
- Start date
do
I'll try my best to explain though I doubt it will make any impact on you.
Stocks do go down in price. The only ones making money are MMs and institutions. They will shake out every single retail short before taking the price down. If a retail short jumps in they will shake him/her out again before taking it down further. When you see a security crashing down, that means the coast is clear from the MMs perspective.
I guess akeyla is a conspiracy theorist.
It's getting thick in here (again). I think I need goggles.
The fascination with short selling is itself ..............fascinating. The greed of the shorts, the paranoia and scapegoats of the longs., the misconceptions, old wives tales, etc. Pure psychology lessons.
Mousehouse brokerages induce Joe Sixpack's to sign margin agreements even when the customer indicates they prefer to avoid leverage. Why? Hypothication. Even little old ladies borrowed against. Order flow, commision income. However, no interest is charged on the short sale. Broker is collateralized and insulated. Poses no inventory problems to the specialist/market maker. None. But ax's don't like lemmings encroaching on their "territitory. Territory? Yep, any intra-day high is the ax putting on the brakes.
The short sale of one share results in TWO long owners, temporarily. Both with the expectation of higher prices. And, both in theory could hold forever. As for dividends, company pays the first holder (who has no inkling he's borrowed against) , the short seller pays the second holder his dividend..
Short sellers serve A purpose......... Liquidity . First they provide some of the supply to WILLING, enthusiastic, and able buyers (and............. there's NO complaints as long as the stock is going up). Secondly, with the exception of bankruptcy/stock cancellation , they HAVE to cover somewhere/sometime. . Hence they are latent demand that provides the SUPPORT to stem a decline. This is accomplihshed ..................WITHOUT accumulating shares. Important concept. And of course, in the event of a squeeze, they are rocket fuel. High short interest does NOT guarantee squeezes.
Furthermore, the most a short can make is 100% nominally, and again, that's only in the event of a BK/cancellation. In contrast, a longs's potential return in theory is INFINITE. As such, shorts in theory have unlimited risk.
And the simple arithmetic. From 14 to 19 is 35.7% but from 19 to 14 is only 26.3% True, you spend dollars not percentages at the grocery store. But you get the gist.
So why would shorts contend with such obstacle? Simple. The beauty of a short is the speed of the move.
Aids in compounding. Prices fall 3 to 4x FASTER than they rise in "normal" times. In fact, 6 months of progress can be wiped out on one contrived gap BEFORE the fun begins. Fond memories of EBAY in January 2005. Fond ones. That said, their are better probabilities (and more opportunities) in shorting from the high day 1 to the low day 2 in LIQUID stocks. Less sir prize.
If you can't make it on the long side with its perpetual upward bias, what makes you think you can on the short side? Short selling is an art. I don't see a great number of "artists" on this site. I do see a lot of dur de dur dur dur "what goes up must come down" in stocks either in strong hands, valid breakout, or being taken up. Feeds the machine.
Naked shorting is a total side issue.
The fascination with short selling is itself ..............fascinating. The greed of the shorts, the paranoia and scapegoats of the longs., the misconceptions, old wives tales, etc. Pure psychology lessons.
Mousehouse brokerages induce Joe Sixpack's to sign margin agreements even when the customer indicates they prefer to avoid leverage. Why? Hypothication. Even little old ladies borrowed against. Order flow, commision income. However, no interest is charged on the short sale. Broker is collateralized and insulated. Poses no inventory problems to the specialist/market maker. None. But ax's don't like lemmings encroaching on their "territitory. Territory? Yep, any intra-day high is the ax putting on the brakes.
The short sale of one share results in TWO long owners, temporarily. Both with the expectation of higher prices. And, both in theory could hold forever. As for dividends, company pays the first holder (who has no inkling he's borrowed against) , the short seller pays the second holder his dividend..
Short sellers serve A purpose......... Liquidity . First they provide some of the supply to WILLING, enthusiastic, and able buyers (and............. there's NO complaints as long as the stock is going up). Secondly, with the exception of bankruptcy/stock cancellation , they HAVE to cover somewhere/sometime. . Hence they are latent demand that provides the SUPPORT to stem a decline. This is accomplihshed ..................WITHOUT accumulating shares. Important concept. And of course, in the event of a squeeze, they are rocket fuel. High short interest does NOT guarantee squeezes.
Furthermore, the most a short can make is 100% nominally, and again, that's only in the event of a BK/cancellation. In contrast, a longs's potential return in theory is INFINITE. As such, shorts in theory have unlimited risk.
And the simple arithmetic. From 14 to 19 is 35.7% but from 19 to 14 is only 26.3% True, you spend dollars not percentages at the grocery store. But you get the gist.
So why would shorts contend with such obstacle? Simple. The beauty of a short is the speed of the move.
Aids in compounding. Prices fall 3 to 4x FASTER than they rise in "normal" times. In fact, 6 months of progress can be wiped out on one contrived gap BEFORE the fun begins. Fond memories of EBAY in January 2005. Fond ones. That said, their are better probabilities (and more opportunities) in shorting from the high day 1 to the low day 2 in LIQUID stocks. Less sir prize.
If you can't make it on the long side with its perpetual upward bias, what makes you think you can on the short side? Short selling is an art. I don't see a great number of "artists" on this site. I do see a lot of dur de dur dur dur "what goes up must come down" in stocks either in strong hands, valid breakout, or being taken up. Feeds the machine.
Naked shorting is a total side issue.