Comments on: How to explain short selling to a non-trader (like your mother)! http://addtrader.wordpress.com/2008/01/12/how-to-explain-short-selling-to-a-non-trader-like-your-mother/ "Formerly The Worst Trader Ever"-Comic Book Guy Thu, 26 Nov 2009 23:53:36 +0000 http://wordpress.com/ hourly 1 By: MParker http://addtrader.wordpress.com/2008/01/12/how-to-explain-short-selling-to-a-non-trader-like-your-mother/#comment-2310 MParker Thu, 26 Nov 2009 00:33:37 +0000 http://addtrader.wordpress.com/2008/01/12/how-to-explain-short-selling-to-a-non-trader-like-your-mother/#comment-2310 That is the BEST, FUNNIEST, explanation EVER! I actually forwarded this article to my Finance Professor! That is the BEST, FUNNIEST, explanation EVER! I actually forwarded this article to my Finance Professor!

]]> By: andy from England http://addtrader.wordpress.com/2008/01/12/how-to-explain-short-selling-to-a-non-trader-like-your-mother/#comment-2303 andy from England Mon, 16 Nov 2009 01:57:07 +0000 http://addtrader.wordpress.com/2008/01/12/how-to-explain-short-selling-to-a-non-trader-like-your-mother/#comment-2303 Why dont you clever Yanks do something useful ? why not make something mechanical that is useful to others and makes you money also ? Its time you stopped screwing up the world for everyone else !!! Why dont you clever Yanks do something useful ? why not make something mechanical that is useful to others and makes you money also ? Its time you stopped screwing up the world for everyone else !!!

]]> By: ideaunique http://addtrader.wordpress.com/2008/01/12/how-to-explain-short-selling-to-a-non-trader-like-your-mother/#comment-2287 ideaunique Fri, 23 Oct 2009 02:04:39 +0000 http://addtrader.wordpress.com/2008/01/12/how-to-explain-short-selling-to-a-non-trader-like-your-mother/#comment-2287 Hi, nice explanation. Suppose if a stock price is $220 today. If I place a "short-sell" order at $270 - and if the stock price goes down to $219 and if I buy it then - in that case I make ($270 - $219 = $51) profit. Right? But suppose if the stock price starts rising and let us say it is $221 - can I wait for some more time (in the hope that the price will go down again)? what if the price reaches $250? how much money I loose? is it ($270 - $250 = 30)? Hi, nice explanation.
Suppose if a stock price is $220 today. If I place a “short-sell” order at $270 – and if the stock price goes down to $219 and if I buy it then – in that case I make ($270 – $219 = $51) profit. Right?

But suppose if the stock price starts rising and let us say it is $221 – can I wait for some more time (in the hope that the price will go down again)? what if the price reaches $250? how much money I loose? is it ($270 – $250 = 30)?

]]> By: addtrader http://addtrader.wordpress.com/2008/01/12/how-to-explain-short-selling-to-a-non-trader-like-your-mother/#comment-2249 addtrader Sat, 22 Aug 2009 03:15:06 +0000 http://addtrader.wordpress.com/2008/01/12/how-to-explain-short-selling-to-a-non-trader-like-your-mother/#comment-2249 So Norm's kind comments woke me up from a long winter's nap. (By the way Norm, if you know any big time editors, feel free to pass my name to them, as who am I to pass up the "big bucks"....lol). In response to comments by Eileen and K Kelly, I think you both may have a fundamental misunderstanding about how the market works. Companies have no say so in what happens to their stock once it gets into the secondary market, i.e. the stock market. They no longer own it, just like a publisher no longer owns the Harry Potter book after it is sold. The market ONLY determines what happens to that stock (regarding value). Tim is just an idiot, probably from the "short sellers are EVIL" camp. What Tim does not understand is that short sellers help make a liquid market. They take the other side of a trade where someone wants to buy that stock. Without short sellers, stocks would be less liquid, spreads larger, and volitility increased. Ron's comments are a little too long and off topic to worry about. Okay.....back to sleep. Formerly ADD Trader So Norm’s kind comments woke me up from a long winter’s nap. (By the way Norm, if you know any big time editors, feel free to pass my name to them, as who am I to pass up the “big bucks”….lol).

In response to comments by Eileen and K Kelly, I think you both may have a fundamental misunderstanding about how the market works. Companies have no say so in what happens to their stock once it gets into the secondary market, i.e. the stock market. They no longer own it, just like a publisher no longer owns the Harry Potter book after it is sold. The market ONLY determines what happens to that stock (regarding value).

Tim is just an idiot, probably from the “short sellers are EVIL” camp. What Tim does not understand is that short sellers help make a liquid market. They take the other side of a trade where someone wants to buy that stock. Without short sellers, stocks would be less liquid, spreads larger, and volitility increased.

Ron’s comments are a little too long and off topic to worry about.

Okay…..back to sleep.

Formerly ADD Trader

]]> By: Norm http://addtrader.wordpress.com/2008/01/12/how-to-explain-short-selling-to-a-non-trader-like-your-mother/#comment-2248 Norm Fri, 21 Aug 2009 23:38:19 +0000 http://addtrader.wordpress.com/2008/01/12/how-to-explain-short-selling-to-a-non-trader-like-your-mother/#comment-2248 I have spent soooo much time reading articles about what the heck this short selling is all about. And by accident I come accross this explanation. I have read pages of explanations and definitions and in a short story he said it all. So simple. This guy needs to be a teacher! And he deserves big bucks. Thanks I finally got it. I have spent soooo much time reading articles about what the heck this short selling is all about. And by accident I come accross this explanation.

I have read pages of explanations and definitions and in a short story he said it all. So simple.

This guy needs to be a teacher! And he deserves big bucks.

Thanks I finally got it.

]]> By: j http://addtrader.wordpress.com/2008/01/12/how-to-explain-short-selling-to-a-non-trader-like-your-mother/#comment-2070 j Sat, 07 Feb 2009 14:42:14 +0000 http://addtrader.wordpress.com/2008/01/12/how-to-explain-short-selling-to-a-non-trader-like-your-mother/#comment-2070 Nicely explained. Makes perfect sense. Thanks! Nicely explained.

Makes perfect sense.

Thanks!

]]> By: tim http://addtrader.wordpress.com/2008/01/12/how-to-explain-short-selling-to-a-non-trader-like-your-mother/#comment-2033 tim Fri, 12 Dec 2008 13:47:46 +0000 http://addtrader.wordpress.com/2008/01/12/how-to-explain-short-selling-to-a-non-trader-like-your-mother/#comment-2033 thats what makes goood old brian there a crook....borrowing my a** thats what makes goood old brian there a crook….borrowing my a**

]]> By: K Kelly http://addtrader.wordpress.com/2008/01/12/how-to-explain-short-selling-to-a-non-trader-like-your-mother/#comment-2006 K Kelly Thu, 09 Oct 2008 17:11:52 +0000 http://addtrader.wordpress.com/2008/01/12/how-to-explain-short-selling-to-a-non-trader-like-your-mother/#comment-2006 I understand the concept of short selling, but your analogy does not equate to the shorting. When you "borrow" the book its market value is irrelevant to the person you borrowed from. The stock however is owned because of its market value. Why do companies let you borrow stocks that you are going to replace with stocks made less valuable by your actions? How do they recoup the net value lost? I understand the concept of short selling, but your analogy does not equate to the shorting.
When you “borrow” the book its market value is irrelevant to the person you borrowed from.
The stock however is owned because of its market value.

Why do companies let you borrow stocks that you are going to replace with stocks made less valuable by your actions?
How do they recoup the net value lost?

]]> By: Ron Macarlo http://addtrader.wordpress.com/2008/01/12/how-to-explain-short-selling-to-a-non-trader-like-your-mother/#comment-2000 Ron Macarlo Mon, 22 Sep 2008 13:52:21 +0000 http://addtrader.wordpress.com/2008/01/12/how-to-explain-short-selling-to-a-non-trader-like-your-mother/#comment-2000 That's where regulation comes in, Eileen. However, there's a debate as to whether "borrowing stocks" should be regulated to prevent short-selling. One side of the debate says that short-selling helps the public by exposing the weakness of a publicly traded stock. To follow the analogy of the Harry Potter book, by borrowing the book and selling it to another person at $25, you can buy another book at Ebay for $15 and pocket the profit. By doing this, you are actually exposing or telling the people that Harry Potter books are only worth $15 in Ebay, not $25. Why should you regulate this activity if it redounds to a benefit by the Harry Potter-reading public? The other side basically says that this activity is evil because it is prone to "collusion" where a group of sellers will agree to "decide" that XYZ stock, although healthy, is actually not. So you may be a retired man who invested in XYZ stock, enjoying looking at the papers and how the value of the stock is going up by the day. Then suddenly the value plummets and so does his lifetime savings. And the culprit? - collusion by these short-sellers. The other side also says that "short-selling" is actually a selfish illegal activity conducted only for personal profit. It does not really have a positive effect on the public. The fact that the stocks that the seller sold is not theirs is a betrayal of customer trust. How would you feel if you learned that your friend short-sold the bracnd new watch he borrowed from you, and that that the watch he gave back to you has a scratch, a mechanical problem, and has the initials that do not represent your name? I'll let you judge for yourself. That’s where regulation comes in, Eileen. However, there’s a debate as to whether “borrowing stocks” should be regulated to prevent short-selling.

One side of the debate says that short-selling helps the public by exposing the weakness of a publicly traded stock. To follow the analogy of the Harry Potter book, by borrowing the book and selling it to another person at $25, you can buy another book at Ebay for $15 and pocket the profit. By doing this, you are actually exposing or telling the people that Harry Potter books are only worth $15 in Ebay, not $25. Why should you regulate this activity if it redounds to a benefit by the Harry Potter-reading public?

The other side basically says that this activity is evil because it is prone to “collusion” where a group of sellers will agree to “decide” that XYZ stock, although healthy, is actually not. So you may be a retired man who invested in XYZ stock, enjoying looking at the papers and how the value of the stock is going up by the day. Then suddenly the value plummets and so does his lifetime savings. And the culprit? – collusion by these short-sellers.

The other side also says that “short-selling” is actually a selfish illegal activity conducted only for personal profit. It does not really have a positive effect on the public. The fact that the stocks that the seller sold is not theirs is a betrayal of customer trust. How would you feel if you learned that your friend short-sold the bracnd new watch he borrowed from you, and that that the watch he gave back to you has a scratch, a mechanical problem, and has the initials that do not represent your name?

I’ll let you judge for yourself.

]]> By: Eileen Noyes-Verchereau http://addtrader.wordpress.com/2008/01/12/how-to-explain-short-selling-to-a-non-trader-like-your-mother/#comment-1998 Eileen Noyes-Verchereau Fri, 19 Sep 2008 13:25:42 +0000 http://addtrader.wordpress.com/2008/01/12/how-to-explain-short-selling-to-a-non-trader-like-your-mother/#comment-1998 Thanks so much for your explanation of short selling. I'm like you mother, so am having a hard time figuring out this whole financial crisis. One thing, though. If I borrow my friend's book, we both agree to the deal. What I don't get is why a company, like say IBM or (to be more relevant) HBOS would agree to let me borrow their stocks. I'd surely appreciate it if you shed a little light on the why lend stock question for me. Sign me, Muddled Mom Thanks so much for your explanation of short selling. I’m like you mother, so am having a hard time figuring out this whole financial crisis.

One thing, though. If I borrow my friend’s book, we both agree to the deal. What I don’t get is why a company, like say IBM or (to be more relevant) HBOS would agree to let me borrow their stocks.

I’d surely appreciate it if you shed a little light on the why lend stock question for me.

Sign me,

Muddled Mom

]]>