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Thread: shorting a stock .. please explain..

  1. #1 shorting a stock .. please explain.. 
    Self appointed RX World Champion Handicapper
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    explain how this works please .
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  2. #2  
    Rx. Senior GreenDoberman's Avatar
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    You borrow the money to sell the stock at the price it is now and basically buy the stock when you want to cover your short.
    You are responsible for any dividends in the time period you are shorting it as well.
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  3. #3  
    Rx. Senior GreenDoberman's Avatar
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    WNO,

    let me give you a basic example.

    You buy WNO at $10 on Jan 1. On Feb. 1, you sell at $20 for a profit of $10 a share.

    You short WNO at $10 on Jan 1. On Feb. 1 you cover the short (or buy) at the price of $5. Your profit is $5 a share.

    Very basic, but I think you get the idea.
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  4. #4  
    Triple digit silver kook Dawoofdaddy's Avatar
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    When selling short a stock, you are betting a stock will go lower, just as similarly you are betting a stock to go higher when you buy.

    Technically, you are borrowing somebody elses shares (most investors keep their shares with their particular brokerage firm) and you then "sell them short". When you decided to end the position, you then buy the shares from the open market and the formerly shorted shares are then for booking purposes placed back into the investors account.

    If you sell a stock short and the price goes lower, you keep the proceeds.

    If you sell a stock short and the price goes higher, you owe the difference.
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  5. #5  
    RX Groupie Peebs's Avatar
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    very good analyses gentleman.


    It is a concept that many traders fail to realize the potential of.
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  6. #6  
    RX Senior
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    the firm you use has to be able to borrow the stock or else you will not be able to short it. you have to have 50% of the value available to put on the position and then your account get credit for the short position.
    acct value 50,000 you short 1000 of a 20.00 stock account value shows 70,000. if stock goes up 5 points your account value is $65,000 if it goes down 5 points your account value is 80,000. if you close out position. at down 5 you repay 15,000 and your account has 55,000.
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