where can I do that "borrow stock and sell it" thing?

taltamir

Lifer
Mar 21, 2004
13,576
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If I understand correctly it should be possible for me to borrow AMD stock, sell it... and then when I want to close the whole shebang rebuy the stock and return it with some extra stocks tacked in...

I normally avoided the stock market since its gambling... but this is a bet I feel comfortable making...

EDIT: I realize that sounds like I am trying to flame or something. I am dead serious...
1. whats the technical name for borrowing stock and than selling it, to later buy stock at the current market price and return the stock...
2. What is a good site to do it at...
3. And what is the tax on it?

I am gonna put my money where my mouth is at. (unless it ends up being prohibitive to do so of course... if the taxes are high and the process is complicated...)
 

alkemyst

No Lifer
Feb 13, 2001
83,967
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This has NOTHING to do with CPUs and Overclocking. Are you old enough to buy stock even?
 

v8envy

Platinum Member
Sep 7, 2002
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Clearly we need an investments and trading forum!

As I pointed out elsewhere, look into options. If you want a limited upside with unlimited risk position you could simply write naked calls. Money out of thin air, *IF* you're right.

Note: this is not investment advice. I am not a licensed broker.
 

madh83

Member
Jan 14, 2007
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Okay....as someone who trades frequently, do not start off in options. Naked options are considerably more risky than stock, and if you aren't even aware of this do not do it. You'll most likely loose all your money in a few seconds.

As for shorting, you can short with a margin account with any broker. Each broker is different, smartmoney.com does a ranking each year, you can check that out to find one that's best for you.
 

nonameo

Diamond Member
Mar 13, 2006
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Exacto. I wouldn't do this. While a buyout would make the stock go up, it's hard to say how much and at what price.
 

taltamir

Lifer
Mar 21, 2004
13,576
6
76
@alkemyst: The relationship to CPUs is that you know.. AMD is a CPU manufacturer! and I was going to put my money where my mouth is at.

@ the rest: Thanks for the excellent advice about the dangers of it. While I wanted to put my money where my mouth is at, I was not going to put forth large sums, but from what I have read I would need at least a 5000$ investment (minimum lot sizes and required maximum percentage of your portfolio) to do something like that. And that is too much. So I wouldn't be doing it after all..

Someone also pointed out to me elsewhere that currently EVERYONE is shorting AMD, which might actually mean its underpriced, and when everyone starts having to give back the stock they loaned they would have to buy it immediately, and increasing prices, causing other shorters to immediately buy before price goes up, causing a chain reaction that would result in great loss.
 

aigomorla

CPU, Cases&Cooling Mod PC Gaming Mod Elite Member
Super Moderator
Sep 28, 2005
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Originally posted by: taltamir

Someone also pointed out to me elsewhere that currently EVERYONE is shorting AMD, which might actually mean its underpriced, and when everyone starts having to give back the stock they loaned they would have to buy it immediately, and increasing prices, causing other shorters to immediately buy before price goes up, causing a chain reaction that would result in great loss.

And how would this effect you?

Your shorting a stock, meaning your borrowing the stock from a broker, and promsing them to replace the stock amount at a later date. As long as the stock doesnt go up when you have to recap it, why would it matter of 1000000000000000000000000000 people shorted the stock. At this point the stock would either go up but i highly doubt it, or you would win big time cuz the company would go bankrupt and the stock would be worthless. <second scenario is more likely>

Also there are timeframes for each option you place. So its not up to you to decide when you need to repay back the option. Theres a lot of legal work in margin accounts as well. Also most brokers wont allow you to participate in options unless you can show some real net worth.

You seriously need to talk to a broker who has a series 7 licences. It seems you dont know what your getting at, and margin's and options AINT something you should go in half assed.
 

street carp

Member
Nov 1, 2007
76
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You just need $500 to open a Scottrade account as long as you don't day trade.

I've done this for a living - shorting and buying. Be careful though. Just when "everyone" is doing something...this is often the time to do just the opposite. Everyone trying to cover their shorts (i.e., buy) will drive the stock sky high whether or not the underlying company is worth anything or not.

But you may be right...companies go bankrupt and stocks do fall to zero.

Good luck.
 

brencat

Platinum Member
Feb 26, 2007
2,170
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@ Taltamir - Shorting stock is generally not advisable for retail investors because of the margin costs (you are required to put up a portion of the $ value as collateral) as well as the exposure you have if the stock suddenly pops one day (margin call). If you want to express a short view, it is safer to buy Puts on AMD. Be advised however that as with all option trades, you generally have to be right with your timing (since they expire) and not overpay if the implied volatility on your particular option is significantly above long term realized volatility for that strike and term. You really need a decent financial model or a professional Bloomberg screen to have a chance at getting this right.

There is a statistic which suggests 70% of all long option positions by retail investors end up being net money losing trades. I can tell you from personal experience having traded options in my PA for years that this is absolutely the case.

With regard to AMD, the generally weak credit profile of the company combined with the elevated level of volatility in the broader market means the implied volatility of AMD's options (calls and puts) is very high right now as was stated in the other AT thread where this topic started, making the options expensive on a valuation basis. An option's price is determined by time to expiration, interest rates, and volatility of the underlying stock (AMD).

Anyway, this has nothing to do with CPUs & Overclocking. Just be d*mn careful with options and know what you're getting into before investing in these products.
 

street carp

Member
Nov 1, 2007
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Originally posted by: taltamir
Someone also pointed out to me elsewhere that currently EVERYONE is shorting AMD, which might actually mean its underpriced, and when everyone starts having to give back the stock they loaned they would have to buy it immediately, and increasing prices, causing other shorters to immediately buy before price goes up, causing a chain reaction that would result in great loss.

Didn't read that one first. This is correct...this one huge danger. Other dangers are positive AMD announcements on future sales or products. It doesn't matter whether the news pans out because in the short term the stock market is highly emotional.

What if the stock ends up at $4 in June of 2008? But before that the price temporarily spikes upward to $11. How long will you hold on to a losing position?

 

sonoran

Member
May 9, 2002
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Not meaning to be critical, but it's clear you don't know much about stocks. And short selling is NOT the place to get your feet wet. There's a little adage about short selling - "He who sells what isn't his'n, must buy it back or go to prison." :Q