simple question

Quote from gamalruach:

danke: The concept of shorting freezes many peoples' minds for some reason.

I am your broker. You come to me to make a trade. The instrument you want to trade just shot up 100 points and you feel certain the move is groundless and it will fall back quickly.

You borrow the shares/units from me by selling them into the market (since you never owned them you must borrow them from me first then you can sell them).

Sure enough as soon as you open the sell trade the price tumbles 90 points down. All that is your profit.

You then "cover" that is, buy back the shares/units you sold then return them to me (since you borrowed them from me).

You keep the profit less either my commission or spread.

In stocks you can only short on an uptick. Not so in forex.

Also, in stocks new rules make it to where you need a minimum amount of money in your account ($25K?) to actively short stocks. Again, not so with fx.


Cheers!

Sam
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Damn 90 points!! How the hell did I miss that trade?? LOL
What stock was that
You can hit bids on Arca all day long...........no uptick...FYI

Peace
 
Here ya go guys. I found another analogy...lol


Pretend that you borrowed your neighbor's lawn mower, which your neighbor generously says you may keep for a couple of weeks while he's on vacation.


You're thinking of buying a lawn mower anyway, so you've been researching the latest sales, and have seen your neighbor's lawn mower on sale for $300, marked down from $500.


While you're mowing your lawn, a passerby stops and offers to buy the lawn mower you're using for $450.

You sell him the lawn mower, then go out and buy the same one on sale for $300, and return it to your neighbor when he returns.


Only now, you've made a $150 on the deal!

Oh well, It was a good try...:D
 
Quote from SumJurk:

Here ya go guys. I found another analogy...lol


Pretend that you borrowed your neighbor's lawn mower, which your neighbor generously says you may keep for a couple of weeks while he's on vacation.


You're thinking of buying a lawn mower anyway, so you've been researching the latest sales, and have seen your neighbor's lawn mower on sale for $300, marked down from $500.


While you're mowing your lawn, a passerby stops and offers to buy the lawn mower you're using for $450.

You sell him the lawn mower, then go out and buy the same one on sale for $300, and return it to your neighbor when he returns.


Only now, you've made a $150 on the deal!

Oh well, It was a good try...:D
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Dude....................Do I know you, I have used that same analogy....lol
 
Quote from cuz:

Dude....................Do I know you, I have used that same analogy....lol
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No, this guy must have stole it from you, first. :D


Analogy

Short Selling has got to be the hardest damn thing to explain to someone who's never heard of it. I've been trying to explain it to my mother for 5 years now, and I still don't think she gets it...lol
 
everyone for their replies!!! i was expecting a lotta bs answers but.. w00t. i definatly got a better understanding for wut shorting stocks means, and how it works, etc.

btw, sry for my spelling lol, yea i should spend a little less time on msn. :P

later.
 
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