Stock of the Day

Out of context: Reply #284

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  • _niko4

    as much as I love the explanation by that car girl on how it works, when it comes to shorting stocks there's one thing I still don't get.

    You "borrow" 100 stocks at $10, you sell them right away and make $1000. Then the stock drops to $7 and you buy 100 shares back costing you $700 so you give those 100 shares back giving you a proft of $300.

    So the mechanism for "borrowing" is unclear to me. Who are you borrowing from? Are they approaching other firms that hold the stock?
    or are is this more like "Owning Mahoney" where they play with the peoples money in the safe, taking it to the casino and returning it in the morning?

    _niko 4Permalink
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    • writing this I think it's got to be selling the shares they're already holding for clients._niko
    • You're selling a contract which describes the arrangement you just mentioned, for a fee. The shares only move when the contract expires.zarkonite
    • The short sellers on GME are "holding" by buying new contracts when their old ones expire, but the new contracts are increasingly more expensive b/c of reddit.zarkonite
    • Eventually they'll run out of capital to buy new contracts (or just feel like enough is enough) and take the loss.zarkonite
    • The short sellers are panicking because this was supposed to be a small job, but it's turned into a multi-billion dollar bet. Thank you internet mob!zarkonite
    • you borrow from your exchange. until recently, most individual investors didn't have access to those kinds of trades. RH and others changed that.sarahfailin
    • what's the time frame like and who calls it? can't they say I'll buy the new contracts when the price comes back down? what are the consequences of not coverin_niko
    • talk to me like I'm Ralph Wiggum :)_niko
    • Read this up, it's a good summary: https://www.thebalan…zarkonite
    • it's a bet. just like racing. you don't own the horsetrooperbill
    • Im thinking you shouldn’t be able sell something you do not own in the first place. Is it a error/gap In the system...islandbridge
    • ...And If that’s the case, could this be fixed with blockchain technology?islandbridge
    • @zarkonite thank you for having
      the patience to describe this :)      sted
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