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Topic: Buy, sell, or hold? - page 2. (Read 5403 times)

hero member
Activity: 700
Merit: 500
daytrader/superhero
January 30, 2013, 07:14:58 PM
#45
RE: shorts vs naked shorts

WTF, how is that supposed to work?

Ok, a regular short requires you to sell shares you dont own, with a promise to buy back later.

With a naked short, you are doing the same thing, only without securing a loan first.  Basically it's an IOU for a short sale.  

http://www.investopedia.com/terms/n/nakedshorting.asp#axzz2JUcuT28I





Edit:
this article explains it better than I did

http://online.barrons.com/article/SB50001424053111904184504577518792352585660.html#articleTabs_article%3D1
Quote
NAKED SHORTING—selling stock that the seller doesn't have and hasn't borrowed, in the hope that its price will quickly fall, letting the seller repurchase it at a lower price and then deliver the stock to the buyer—is generally illegal. Usually, sellers must borrow a stock, or at least determine that they can borrow it, before they can sell it short.


hero member
Activity: 672
Merit: 500
January 30, 2013, 06:14:06 PM
#44
i do understand the conversation that took place earlier about "selling" essentially being equivalent to "shorting" but most professionals don't view it that way.

It's not even close.  If you are caught on the wrong side of a naked short you are looking at huge losses.  
On the other hand, if you missed the train on an upmove after you just sold your bitcoins you don't have any losses, you just don't have the profit you otherwise would have had.

Serious question, not trying to be a smartass:

If borrowing the shares is required to call it shorting, why does the term naked short mean?  I thought a naked short was shorting without actually owning the asset to begin with, and therefore "regular" shorting would be shorting when you do start out owning the asset.  Am I mistaken?

naked shorting is when you don't even have to borrow the share from a long to put on the short.

WTF, how is that supposed to work?

example:

i'm an account holder at Fidelity.  suppose, in aggregate, they have 100 customers who hold 100,000 shares of Apple.

i am a short seller.  for simplicity let's say i have enough money in my account to allow me to borrow and sell those 100,000 shares to buyers looking to go long.  if Fidelity is an ethical firm, they won't allow me to do that with any more than the 100,000 shares held at the firm, even if i want to short 150,000 shares.  if they aren't ethical, they might allow me to naked short the extra 50,000 shares.

in other words, sell what they don't have.

So if you made too much profit, they would have to pay up themselves to cover the difference?

not sure what you mean.  you actually have to have your own USD's initially in your account to be allowed to short shares.  if you have a margin acct like me (allows leverage), you must hold around $1 of your own money for every $3 in share value that you short.

if the short trade starts going against you (shares go UP in value instead of DOWN like you were betting) then you have to wire in more USD's to keep the ratio in line.

But what if you are right?... If they (broker) let you(short seller) sell 50k more shares than they(broker) had, they(broker) have to pull profits out of their ass(Bernanke) to pay you.

He has a margin account, it's just an extension of credit. 
legendary
Activity: 1904
Merit: 1002
January 30, 2013, 05:42:42 PM
#43
i do understand the conversation that took place earlier about "selling" essentially being equivalent to "shorting" but most professionals don't view it that way.

It's not even close.  If you are caught on the wrong side of a naked short you are looking at huge losses.  
On the other hand, if you missed the train on an upmove after you just sold your bitcoins you don't have any losses, you just don't have the profit you otherwise would have had.

Serious question, not trying to be a smartass:

If borrowing the shares is required to call it shorting, why does the term naked short mean?  I thought a naked short was shorting without actually owning the asset to begin with, and therefore "regular" shorting would be shorting when you do start out owning the asset.  Am I mistaken?

naked shorting is when you don't even have to borrow the share from a long to put on the short.

WTF, how is that supposed to work?

example:

i'm an account holder at Fidelity.  suppose, in aggregate, they have 100 customers who hold 100,000 shares of Apple.

i am a short seller.  for simplicity let's say i have enough money in my account to allow me to borrow and sell those 100,000 shares to buyers looking to go long.  if Fidelity is an ethical firm, they won't allow me to do that with any more than the 100,000 shares held at the firm, even if i want to short 150,000 shares.  if they aren't ethical, they might allow me to naked short the extra 50,000 shares.

in other words, sell what they don't have.

So if you made too much profit, they would have to pay up themselves to cover the difference?

not sure what you mean.  you actually have to have your own USD's initially in your account to be allowed to short shares.  if you have a margin acct like me (allows leverage), you must hold around $1 of your own money for every $3 in share value that you short.

if the short trade starts going against you (shares go UP in value instead of DOWN like you were betting) then you have to wire in more USD's to keep the ratio in line.

But what if you are right?... If they (broker) let you(short seller) sell 50k more shares than they(broker) had, they(broker) have to pull profits out of their ass(Bernanke) to pay you.
legendary
Activity: 1764
Merit: 1002
January 30, 2013, 05:34:47 PM
#42
i do understand the conversation that took place earlier about "selling" essentially being equivalent to "shorting" but most professionals don't view it that way.

It's not even close.  If you are caught on the wrong side of a naked short you are looking at huge losses.  
On the other hand, if you missed the train on an upmove after you just sold your bitcoins you don't have any losses, you just don't have the profit you otherwise would have had.

Serious question, not trying to be a smartass:

If borrowing the shares is required to call it shorting, why does the term naked short mean?  I thought a naked short was shorting without actually owning the asset to begin with, and therefore "regular" shorting would be shorting when you do start out owning the asset.  Am I mistaken?

naked shorting is when you don't even have to borrow the share from a long to put on the short.

WTF, how is that supposed to work?

example:

i'm an account holder at Fidelity.  suppose, in aggregate, they have 100 customers who hold 100,000 shares of Apple.

i am a short seller.  for simplicity let's say i have enough money in my account to allow me to borrow and sell those 100,000 shares to buyers looking to go long.  if Fidelity is an ethical firm, they won't allow me to do that with any more than the 100,000 shares held at the firm, even if i want to short 150,000 shares.  if they aren't ethical, they might allow me to naked short the extra 50,000 shares.

in other words, sell what they don't have.

So if you made too much profit, they would have to pay up themselves to cover the difference?

not sure what you mean.  you actually have to have your own USD's initially in your account to be allowed to short shares.  if you have a margin acct like me (allows leverage), you must hold around $1 of your own money for every $3 in share value that you short.

if the short trade starts going against you (shares go UP in value instead of DOWN like you were betting) then you have to wire in more USD's to keep the ratio in line.
legendary
Activity: 1904
Merit: 1002
January 30, 2013, 05:20:51 PM
#41
i do understand the conversation that took place earlier about "selling" essentially being equivalent to "shorting" but most professionals don't view it that way.

It's not even close.  If you are caught on the wrong side of a naked short you are looking at huge losses.  
On the other hand, if you missed the train on an upmove after you just sold your bitcoins you don't have any losses, you just don't have the profit you otherwise would have had.

Serious question, not trying to be a smartass:

If borrowing the shares is required to call it shorting, why does the term naked short mean?  I thought a naked short was shorting without actually owning the asset to begin with, and therefore "regular" shorting would be shorting when you do start out owning the asset.  Am I mistaken?

naked shorting is when you don't even have to borrow the share from a long to put on the short.

WTF, how is that supposed to work?

example:

i'm an account holder at Fidelity.  suppose, in aggregate, they have 100 customers who hold 100,000 shares of Apple.

i am a short seller.  for simplicity let's say i have enough money in my account to allow me to borrow and sell those 100,000 shares to buyers looking to go long.  if Fidelity is an ethical firm, they won't allow me to do that with any more than the 100,000 shares held at the firm, even if i want to short 150,000 shares.  if they aren't ethical, they might allow me to naked short the extra 50,000 shares.

in other words, sell what they don't have.

So if you made too much profit, they would have to pay up themselves to cover the difference?
legendary
Activity: 1764
Merit: 1002
January 30, 2013, 05:11:39 PM
#39
i do understand the conversation that took place earlier about "selling" essentially being equivalent to "shorting" but most professionals don't view it that way.

It's not even close.  If you are caught on the wrong side of a naked short you are looking at huge losses.  
On the other hand, if you missed the train on an upmove after you just sold your bitcoins you don't have any losses, you just don't have the profit you otherwise would have had.

Serious question, not trying to be a smartass:

If borrowing the shares is required to call it shorting, why does the term naked short mean?  I thought a naked short was shorting without actually owning the asset to begin with, and therefore "regular" shorting would be shorting when you do start out owning the asset.  Am I mistaken?

naked shorting is when you don't even have to borrow the share from a long to put on the short.

WTF, how is that supposed to work?

example:

i'm an account holder at Fidelity.  suppose, in aggregate, they have 100 customers who hold 100,000 shares of Apple.

i am a short seller.  for simplicity let's say i have enough money in my account to allow me to borrow and sell those 100,000 shares to buyers looking to go long.  if Fidelity is an ethical firm, they won't allow me to do that with any more than the 100,000 shares held at the firm, even if i want to short 150,000 shares.  if they aren't ethical, they might allow me to naked short the extra 50,000 shares.

in other words, sell what they don't have.
legendary
Activity: 1904
Merit: 1002
sr. member
Activity: 434
Merit: 250
January 30, 2013, 05:06:44 PM
#37
Right. Like JPM does with paper silver. The paper silver contracts are counterfeit because there's no silver to back them.

WTF, how is that supposed to work?

It works by counterfeiting something. It's done with stocks by selling more shares than exist.
legendary
Activity: 1904
Merit: 1002
January 30, 2013, 05:06:27 PM
#36
i do understand the conversation that took place earlier about "selling" essentially being equivalent to "shorting" but most professionals don't view it that way.

It's not even close.  If you are caught on the wrong side of a naked short you are looking at huge losses.  
On the other hand, if you missed the train on an upmove after you just sold your bitcoins you don't have any losses, you just don't have the profit you otherwise would have had.

Serious question, not trying to be a smartass:

If borrowing the shares is required to call it shorting, why does the term naked short mean?  I thought a naked short was shorting without actually owning the asset to begin with, and therefore "regular" shorting would be shorting when you do start out owning the asset.  Am I mistaken?

naked shorting is when you don't even have to borrow the share from a long to put on the short.

WTF, how is that supposed to work?
legendary
Activity: 1764
Merit: 1002
January 30, 2013, 05:04:30 PM
#35
i do understand the conversation that took place earlier about "selling" essentially being equivalent to "shorting" but most professionals don't view it that way.

It's not even close.  If you are caught on the wrong side of a naked short you are looking at huge losses.  
On the other hand, if you missed the train on an upmove after you just sold your bitcoins you don't have any losses, you just don't have the profit you otherwise would have had.

Serious question, not trying to be a smartass:

If borrowing the shares is required to call it shorting, why does the term naked short mean?  I thought a naked short was shorting without actually owning the asset to begin with, and therefore "regular" shorting would be shorting when you do start out owning the asset.  Am I mistaken?

naked shorting is when you don't even have to borrow the share from a long to put on the short.
legendary
Activity: 1904
Merit: 1002
January 30, 2013, 04:54:46 PM
#34
i do understand the conversation that took place earlier about "selling" essentially being equivalent to "shorting" but most professionals don't view it that way.

It's not even close.  If you are caught on the wrong side of a naked short you are looking at huge losses. 
On the other hand, if you missed the train on an upmove after you just sold your bitcoins you don't have any losses, you just don't have the profit you otherwise would have had.

Serious question, not trying to be a smartass:

If borrowing the shares is required to call it shorting, why does the term naked short mean?  I thought a naked short was shorting without actually owning the asset to begin with, and therefore "regular" shorting would be shorting when you do start out owning the asset.  Am I mistaken?
legendary
Activity: 1638
Merit: 1001
₪``Campaign Manager´´₪
January 30, 2013, 04:45:42 PM
#33
i do understand the conversation that took place earlier about "selling" essentially being equivalent to "shorting" but most professionals don't view it that way.

It's not even close.  If you are caught on the wrong side of a naked short you are looking at huge losses. 
On the other hand, if you missed the train on an upmove after you just sold your bitcoins you don't have any losses, you just don't have the profit you otherwise would have had.
legendary
Activity: 1764
Merit: 1002
January 30, 2013, 04:39:28 PM
#32
I think the important part is the forced buyback , most people here who claim "short" have no obligation to cover because they have usually sold coins they owned, not borrowed.

yes, this is a huge difference.  the psychological pressure to "cover" can be unbearable to the average investor and can help propel markets higher as well as provide support in down drafts.

i do understand the conversation that took place earlier about "selling" essentially being equivalent to "shorting" but most professionals don't view it that way.
hero member
Activity: 700
Merit: 500
daytrader/superhero
January 30, 2013, 04:37:41 PM
#31
I thought we went over this, shorting doesn't need to be leveraged to be considered shorting.

Shorting is (by definition) selling a stock or commodity that you don't own, with a promise to buy it back at a later date with interest (hopefully at a lower price). How is this done without leverage?



source:
http://www.investopedia.com/university/shortselling/shortselling1.asp#axzz2JUcuT28I
legendary
Activity: 1638
Merit: 1001
₪``Campaign Manager´´₪
January 30, 2013, 04:35:49 PM
#30
I keep hearing people talk about shorting bitcoin, but how are you doing it without bitcoinica or similar leveraged trading platform? Or are you just shorting through private btc loans? Or is the term "shorting" just being misused on this forum?

The "shorting" term is frequently misused on this forum, used instead of  plain old "selling".

yeah, its annoying.

 I thought we went over this, shorting doesn't need to be leveraged to be considered shorting.

Yes I pointed this out before.  Apparently you still believe you are right.  I once again invite you to look at your own wikipedia link http://en.wikipedia.org/wiki/Shorting and see the "share borrowing"  and "share return" part in the schematic.   (no hard feelings Adam, but you are wrong on this one).
legendary
Activity: 1904
Merit: 1037
Trusted Bitcoiner
January 30, 2013, 04:27:38 PM
#29
I keep hearing people talk about shorting bitcoin, but how are you doing it without bitcoinica or similar leveraged trading platform? Or are you just shorting through private btc loans? Or is the term "shorting" just being misused on this forum?

The "shorting" term is frequently misused on this forum, used instead of  plain old "selling".

yeah, its annoying.

 I thought we went over this, shorting doesn't need to be leveraged to be considered shorting.
legendary
Activity: 1764
Merit: 1002
January 30, 2013, 04:24:38 PM
#28
I keep hearing people talk about shorting bitcoin, but how are you doing it without bitcoinica or similar leveraged trading platform? Or are you just shorting through private btc loans? Or is the term "shorting" just being misused on this forum?

The "shorting" term is frequently misused on this forum, used instead of  plain old "selling".

yeah, its annoying.
legendary
Activity: 1638
Merit: 1001
₪``Campaign Manager´´₪
January 30, 2013, 04:16:51 PM
#27
I keep hearing people talk about shorting bitcoin, but how are you doing it without bitcoinica or similar leveraged trading platform? Or are you just shorting through private btc loans? Or is the term "shorting" just being misused on this forum?

The "shorting" term is frequently misused on this forum, used instead of  plain old "selling".
sr. member
Activity: 434
Merit: 250
January 30, 2013, 03:56:43 PM
#26
"High price" is a relative term. USDs are total crap so as they(and other fiats) continually devalue due to endless printing, BTC prices that seemed high previously will become bargains. The same is true for PM prices.
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