Shorting stock | General financial discussion | Discussion forum

Today could be the start of the next leg down that Doug predicted.

Bud said
How does it work just sell the amount of shares u wanna short say 100 shares of ABC put in a sell order to short borrow the stock. Then when i want to close the position put a buy order in to buy 100 shares to pay back the borrowed stock. Assuming a liquid known stock. any other risks besides stock goin up n suffering a loss  

u prob not the sophisticated investor to do a outright short sale if you have to ask the question here. Any way I will answer not judging whether you should do it or not as it is your money after all.

1) Not all discount brokerage account allow outright short sale, if it does, it requires a margin and you will be subject to margin call
2) No such thing as "assuming" a liquid known stock, stock can trade liquid for whatever reason and a liquid stock does NOT mean it is easy to borrow (if you know what short squeeze means)
3) When you borrow a stock, you may be charged as much as 100% overnite interest at the extreme (again short squeeze). A stock can trade liquid and still you may be charged a huge loan interest to borrow the stock

Good luck if you decide to short any stock. Buy a naked put and spend some premium a much less risky move if you ask me....

Bud said
Omg what a scam short selling is especially now that mainstream companies even in the s&p are being pumped. From bankrupt Hertz to Game even Tesla which makes no profit without government rebates. And u really can get wiped out. I figured a company goin down the drain would be a somewhat limited loss. Take Game for example a relatively small amount only 5 or 10k shorted at 30 woulda cost u 100-200k.

What's worrisome now is the pump&dumps have scared away legitimate shorts. Now any company can be hijacked and many have been as we've seen a plethora of profitless tech cos. go public n reach valuations higher than Canada's biggest banks.

Where can i find the short interest on individual companies  

Its not a scam, it is a simple supply vs demand story. What you saw in GME is essentially leverage long via call options result in a huge demand for actual stocks that need to be bought by the market makers to cover their "implied short" when they sold the call options to the little lemmings, which together became a bigger giant than the market makers.

Think of it this way, the dudes who bought the call options used it as a leverage long, and they dont sell actual shares to hedge. The market makers/professionals who sold the call options HAVE to buy shares to hedge their short position. End result is what traders know as gamma squeeze, a term non-industry players are not familiar with, but essentially a short squeeze in laymen's term.

Bud said
The above response is why i say its a scam no investor except a few insiders could be expected to figure that all out n have accurate info. It's a cheaters game. And lookin at options one gets the sense they are unable to fulfill some contracts reasonably.  

it is certainly not grade one material in this case when it comes to investment knowledge or how the market works, quite complicated for the average Joe for sure. But it is not a scam/ cheat. No one lies about GME's financial strength, no one guarantee any one a particular trade will make $. Its all a fair game. One decides to play, one lives with the consequences, some good, some very bad.

Best story is a 10years old kid who was given 10 shares of GME as a birthday gift last year. He decided to cash out at or near the high point. Not bad to turn $70 into $4000. He did not cheat or lie to anyone to earn it 🙂

That advantage that big-holders insiders have is knowledge and understanding that's not unfair. Many of them can read a balance sheet and can tell if the shares are overvalued or not.

That's in contrast to many retail investors who don't even understand that the shares they are trading are fractional interests of a business.

It is not surprising that many retail "investors" don't do well judging from the stupidity of some of the "advice" I've received from other retail investors.

I remember one relative advising me that I was wasting my time with blue chip stocks. I ought to be investing in penny stocks. After all, when a 50¢ penny stock goes up by 50¢, the investor has made 100%! In contrast, when a $25 blue chip stock goes up by 50¢, the investor has only made 2%.

Didn't understand that a company can split or consolidate its shares to get any share price desired.

There there was that friend that was surprised I had money in Bank of Montreal instead of Nortel. Bank of Montreal shares were trading at all time highs. Therefore, upside was limited. In contrast, Nortel was trading around $10, down from their high of $124. Much more upside potential!

Didn't understand that a high is not a ceiling and that a high in the past does not exert an invisible pull on the shares upwards.

There is often inside information that retail investors just don't have access to until a later time. I used to quiz relatives and acquaintances that worked for certain companies re the operations, the contracts they had, etc, you find out some interesting stuff sometimes. One example: I have a relative who for a while worked underground in a gold mine (junior operating company) who made a point of conversing regularly with the geologists who came daily to examine which direction to drill to follow the best seam, etc and he and I were able to put together this info gleaned at the earliest possible moment re grams of gold per ton estimates plus a bunch of other data that we then compared to what the share price was based on, to what other mines were getting out of the ground, industry norms, etc, etc, and it seemed to us the stock price was greatly undervalued based on that latest data that would become public over time later. Turned out we were very right. Point is, I'm not naive enough to think that was the only time in history that someone got inside info before it was widely known, I imagine it goes on every day, especially for the wealthy, connected crowd, the hedge funds, etc.

Don't need the inside info and it's still risky.

Author Morton Shulman wrote in one of his books that he received an inside tip about a takeover and bought shares. Company had a fire shortly afterwards on one of its oil platforms. Takeover fell through.

Same with gold. Gold deposit was discovered. But, further analysis found lots of mercury with the gold. That made refining it very expensive and uneconomic. Shares collapsed.

No-one tipped me off that Microsoft would be 10X its price 15 years later.

There's lots of money to be made (and kept) by those who know how to analyze public information. It's just too bad for those who don't know how to, can't also figure out how to buy an S&P 500 ETF, and keep believing in conspiracy theories to justify their lot in life.

Ditto with those comments about "gatekeeping" of information. Real time data is under $100/month. If one can really make $1,000 to $2,000 a month trading with the help of tick-by-tick market data, then it is really stupid not to pay the $100/month and do it.

People seem to be ignorant of a basic fact: Valuables are not free. Think about that. Valuable information and insights are also valuables. The book Investment Management in Canada by James Hatch was far from free. The amount of money I made from what I learned from that book is astronomical compared to the $50 it cost me.

It is really sad to see that kind of attitude. When I was in high school, a copy of Encyclopedia Britannica was thousands of dollars. Not something my parents could afford. I just checked. Online access now to the contents is US$75 a year! My parents would paid US$75/year for me to have access to that kind of information.

Norman1, everything you say is right, i.e. inside info doesn't always pan out. But on the other hand, often it does. And you say lots of folks make good money being smart & informed - very true. (What I'm saying is not mutually exclusive with what you're saying, I'm saying there's also some rigged stuff in financial business, no different than any business where insiders know stuff that's unknown outside.)

Ands also true that your "real time" data doesn't become available until after events like I described re the gold mine or Loonie re the diamond mine. And every time there's an initial offering or a proposed takeover there are always some involved insiders or interested onlookers (like my relative at the drilling point) who know about it before "real time" data has a whiff of it. Come to think of it I seem to remember some of the big bank brokerages had their hands slapped years ago, something about when you put in a sell order they (supposedly your agent for conducting the trade) would instead buy it and then sell a second later for a tiny bit more for stocks that were on the uptick - I'm pretty sure I've got the details wrong but it was something like that. Stuff like that goes on all the time, everywhere, and that's what Bud seemed to be surprised by, I think.