betting against Facebook
Out of context: Reply #12
- Started
- Last post
- 49 Responses
- 20020
You can technically short using options. This is a simple explanation. Options are much more complex.
You are simply stating that you will buy stock A at X price at X time in the future. Between now and X time in the future, stock A can go up or down. Again, this is a contract but it is a readily available contract and you would need to state which maturity (X time in future) and price are given to you.
If you bought options for stock A will be at $5 in 6 months, and stock goes to $8 in 6 months, you made $3. You can either exercise your option to buy or sell the option to someone else. You can make options to buy or sell at given time.
The beauty about option is that you are not purchasing the stock but buying the right to buy or sell contract. You can spend 1/100 of the price of a stock. At the end of the contract term, you just either payout or get the difference.