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re: I have a really stupid and dumb (or both) question about shorting a stock...
Posted on 1/26/16 at 10:48 am to The Egg
Posted on 1/26/16 at 10:48 am to The Egg
From what I understand, say a stock is $100 today and you think it will go down to $50.
If you short the stock, someone "gives" it to you for you to do what you will in exchange for its value today. You sell it for $100 and have $100 cash in hand. When it goes down to $50, you buy it back for $50.
You give the stock back and you keep the difference ($50). You can only gain of the stock goes down.
If it goes up, you could potentially lose infinite money.
If you short it at $100 and it goes up to $150, you have to buy it back at $150 and you lose $50.
If you short the stock, someone "gives" it to you for you to do what you will in exchange for its value today. You sell it for $100 and have $100 cash in hand. When it goes down to $50, you buy it back for $50.
You give the stock back and you keep the difference ($50). You can only gain of the stock goes down.
If it goes up, you could potentially lose infinite money.
If you short it at $100 and it goes up to $150, you have to buy it back at $150 and you lose $50.
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