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Holy hell... could you imagine making $67 Million in 25 minutes?
- Thread starter MikeMike
- Start date
HardcoreRobot
Lifer
you borrow someone elses stock and sell it to a 3rd party at the high price, then when the price drops you buy it at the lower price and return the shares to the person you borrowed it from initially
Mo0o
Lifer
Well in a regular buy/sell situation you migh wait for a stock to go down but after you buy, you want it to go up.
WHen you short you just want it to tank right? Seems liek if thats the case, people could be motivated to do all kinds of things to make a stock tank. From what I've read, some peopel suspect Bear Stearns was brought down by unscrupulous short sellers from some hedge funds. All you need to do is create a perception of weakness and all the repolenders will run like headless chickens and other lender might make margin calls.
I think short selling is fundamentally perfectly fine but it definitely incentivizes people to do some unscrupulous things that might not be able to be detected. Economists please correct me if this is totally wrong.
Crusty
Lifer
Why would you want it to tank? You just want the price to go down. What people speculate happened to Bear Stearns were massive amounts of naked short selling where you don't borrow the shares before you short them and exit your position before the trades clear so you don't have to deliver the borrowed shares. That's illegal.
Short selling and then buying back your position is mathematically the same as buying and then selling, just with opposite signs.
dullard
Elite Member
People always forget the first option and skip right to bashing short sellers.
Option #1: Suppose you own 100 shares of stock X which is at $100/share. Suppose you sell that stock for $10,000. Suppose that stock X drops to $90/share. Suppose you buy 100 shares for $9,000 and you have $1000 left over. Bingo you went from 100 shares of stock X and no money to 100 shares of stock X and $1000. You gained $1000 from the stock price going down. Just keep rinsing and repeating: sell high and buy low. That is the fundamental thing that people are told about stocks. You gain by the stock going up, but you can also gain by the stock going down.
Option #2 is to do the same thing as mentioned above, but borrow someone else's shares instead of using your own. In effect, it is the same thing. You are doing EXACTLY what people are told to do: sell high and buy low. Yet people bash this practice and claim it as being evil or wrong or otherwise bad.
Option #3 is where things are evil and unethical. Suppose you CLAIM to have borrowed someone else's stock and then you sell it (things are all online so you don't actually have proof of owning the stock). Then you later buy the stock back when it is low. This on the surface could be innocent, but it could lead to manipulations. Suppose a company has 1000 shares in total but you sell 100,000 shares by claiming to own them let say at 100 shares at a time to 1000 people that you fool. Suddenly with 100,000 shares sold the price plummets because each share is nearly worthless with so much stock floating around. Then you can buy it all back for next to nothing. You just diluted the value of that company by a factor of 100 and profitted though illegal methods. To make it even more profitable for you, also spread bad rumors about the company or its products or leaders.
Only option #3 is wrong. But the other two options are perfectly moral and legal. You are doing just what you are told to do in school: sell high and buy low. This practice is necessary for smooth functioning of the stock market.
fbrdphreak
Lifer
I always wondered how he was planning to profit by selling stock and then having it go down in value...
dainthomas
Lifer
There was a study I heard about on the radio a couple years ago that said basically people have a baseline level of happiness. Say on a scale of 1 to 10 it's a 6. Then Paul Allen gives you ten billion for being a great guy and it goes up to a 10 for maybe a few months. It will eventually return to a 6. Slaving away to make more and more money, thinking you will reach a point where you will have maximum happiness, is an exercise in futility.
Jim Keane has the right attitude. He made his millions during the dot com boom, and he's trying to make a little more now. But at the end of the article he says if it doesn't work out he's just going to go ski and surf. Why drive yourself into cardiac arrest when you already have the ability to live the life you love?
her209
No Lifer
1. Al wants to short stock ABC. Calvin wants to buy stock ABC.
2. Betty owns one share of ABC.
3. Al borrows Betty's stock and sells it to Calvin.
4. Dave also wants to buy stock ABC.
5. Al borrows Calvin's share of ABC and sells it to Dave.
Is it legal to have more shares outstanding than there are actual shares? What happens when there aren't enough shares to cover the shares outstanding on a margin call?
2. Betty owns one share of ABC.
3. Al borrows Betty's stock and sells it to Calvin.
4. Dave also wants to buy stock ABC.
5. Al borrows Calvin's share of ABC and sells it to Dave.
Is it legal to have more shares outstanding than there are actual shares? What happens when there aren't enough shares to cover the shares outstanding on a margin call?
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