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re: How do you "borrow" someone's stock share and sell it?
Posted on 1/28/21 at 1:18 pm to Sooner5030
Posted on 1/28/21 at 1:18 pm to Sooner5030
quote:May be the safest, but there is a time premium built into the price of the put, so its not always the most cost effective way.
The safest/fairest way to short a stock is to buy a Put.
0
Posted on 1/28/21 at 1:19 pm to BFIV
quote:
In that case, why would I even allow someone to borrow my stock and sell it if I don't make a profit or suffer a loss? What's in it for me with my 3 shares?
You get a premium.
This post was edited on 1/28/21 at 1:20 pm
Posted on 1/28/21 at 1:19 pm to BFIV
quote:
I don't understand how somebody can borrow my 3 shares of company stock that I do own and then sell it.
You think that's crazy, let me tell you about fractional reserve banking.
Posted on 1/28/21 at 1:43 pm to BFIV
quote:
In that case, why would I even allow someone to borrow my stock and sell it if I don't make a profit or suffer a loss? What's in it for me with my 3 shares?
The lending is mostly done by brokerage firms. They're not unlike a bank providing a loan. The person or firm that borrows the stock pays them interest plus maybe a transaction fee for the "loan".
Posted on 1/28/21 at 1:44 pm to Jyrdis
quote:Yep. There's some dirty people that engage in it though
Pretty easy. You let your brokerage know that you have stock and are willing to lend it to earn interest. You sign the margin account papers and then your brokerage will ask you what you want to lend. You then lend it to a short.
Note: short selling is a part of the game. It’s a bet the stock goes down.
Posted on 1/28/21 at 2:19 pm to BFIV
Let's see if we can simplify...it's not always an easy concept.
You Sell 1000 shares Stock you don't have at $50 per share. so you have sold $50,000.00 worth of stock
Your plan is to wait till the stock goes down to $1 and buy 1000 shares so you can fulfil what you sold earlier. Costing you $1000.00
You make $49K on the deal.
In this deal instead of the stock going down it went up to $500. Now when the investor has to buy shares to cover what they sold...they're losing almost $500k.
You Sell 1000 shares Stock you don't have at $50 per share. so you have sold $50,000.00 worth of stock
Your plan is to wait till the stock goes down to $1 and buy 1000 shares so you can fulfil what you sold earlier. Costing you $1000.00
You make $49K on the deal.
In this deal instead of the stock going down it went up to $500. Now when the investor has to buy shares to cover what they sold...they're losing almost $500k.
Posted on 1/28/21 at 2:56 pm to Pecker
quote:I think of it like ticket scalping. It's legitimate and even helpful in an abstract sense, but every body you see making a living at it is a ginormous piece of shite.
Note: short selling is a part of the game. It’s a bet the stock goes down.
Yep. There's some dirty people that engage in it though
Posted on 1/28/21 at 3:03 pm to BFIV
quote:
What's in it for me with my 3 shares?
I already told you. You get the same 3 stocks back + a little extra for letting the short seller borrow your stocks.
How much? Depends on your bargaining skill
Posted on 1/28/21 at 3:05 pm to GumboPot
So, question about the short contracts...do those that hold them have to hold onto them for the duration, or can they "cash out" (or whatever the correct term is) any time they want?
In other words, can you buy one of these contracts for say...a month...and if the stock dips enough in that month for you to be happy with the profit...just go ahead and close it out early? Or do you have to wait?
In other words, can you buy one of these contracts for say...a month...and if the stock dips enough in that month for you to be happy with the profit...just go ahead and close it out early? Or do you have to wait?
Posted on 1/28/21 at 3:08 pm to BFIV
You borrow the shares from a major brokerage. The brokerage may already have shares in inventory. If not, the brokerage can acquire the shares.
This post was edited on 1/28/21 at 3:09 pm
Posted on 1/28/21 at 3:38 pm to ShermanTxTiger
Stock is at $100 so short seller borrows the stock from the lender and sells it for $100. The price of the stock goes to to $75 so the short seller uses the $100 to rebuy the share of the stock. He gives the share back to the lender and keeps the extra $25
Posted on 1/28/21 at 4:05 pm to Cracker
quote:
Go away
Troll. Go back to the OT.
Posted on 1/28/21 at 4:09 pm to LafTiger
I understand it better now. Thanks to everyone who explained how it works. Nevertheless, it just seems a little shady to me in that it appears this is an unethical, but legal, strategy to manipulate the price of a stock? This time, the little guys beat the hedge fund big boys at their own game. Good for them!
Posted on 1/28/21 at 4:12 pm to BFIV
hypothecation
keep your position in cash (type 1) instead of margin and nobody can borrow it.
keep your position in cash (type 1) instead of margin and nobody can borrow it.
Posted on 1/28/21 at 4:20 pm to V2_Jigsaw
quote:So tell me, if I have a stock valued at $20, and I let someone borrow it, but when I get it back it's worth $8 because all the short sellers pushed it down, how is that beneficial to me?
They have a “contract” where they borrow stocks (say at $20 and sell them, but then they have to return the same number of stocks back to the person or institution they borrowed them from. So that’s when they buy the stocks back at a lower price and pocket the difference.
Posted on 1/28/21 at 4:32 pm to BFIV
No you aren’t the DNC I can post where I want
Posted on 1/28/21 at 4:46 pm to BFIV
this doesn't happen in cash accounts. this happens in margin accounts. Margin accounts basically set up for the sole purpose of manipulation in which you can get your funds 3 days faster if you're willing to loan your shares.
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