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Ask HN: Please explain short selling?

• wdewind 16y ago
  Short selling works like this: Party A buys 500 MSFT shares from partner B today, and then immediately sells them at the current market price to C. Depending on the terms of the deal, party A must pay back the same number of shares at a later date to party B. Let's say 30 days later, party A rebuys 500 shares of MSFT at THAT current market rate (hoping it has decreased over the last 30 days), and repays the same number of shares (hoping it's a smaller $ value) to party B. The people lending the short are expecting the stock to go up, the people buying are expecting it to go down. Hope that helps
  • mvalle 16y ago
    Does it work, if the people lending it, are just planning to hold the stock forever?
    • GVRV 16y ago
      I think holding duration is part of the contract.
  • mseebach 16y ago
    > The people lending the short are expecting the stock to go up They might agree that the stock is going to go down, but, because they're long, i.e. expecting the stock to go up over a long period of time (e.g. by the time they retire), they don't care, or at the very least isn't willing to make the gamble. Also, there's a fee for the lending.
  • megablast 16y ago
    Usually the lenders are hedge funds, who hold large amounts of stocks of all sorts. They are playing a different game to shorters, and happy to get a fee for lending stock. So they make money in holding stock, which is what they were going to do anyway.
    • ct4ul4u 16y ago
      Actually, the biggest lenders are index funds.
    • ct4ul4u 16y ago
      Actually, the biggest lenders are index funds.
  • mduncan 16y ago
    If the lender of the stocks is long on the them, what incentive do they have to get involved in this workflow?
    • gxti 16y ago
      For one, it doesn't affect their pricing. If they're confident that the price will go up, then collecting some more money on lending fees is just icing on the cake. For two, it helps to understand who actually owns shares. Most individuals trade in a "margin" account in which the trader gets some additional liquidity in exchange for lessened rights. These people don't actually own the shares they buy -- they are in fact owned by their broker, who keeps a pool of all the shares their clients purchase. Because of this, the broker can loan out some of the shares in that pool for additional revenue. If I remember correctly, there's little risk involved if the clients sold more shares than were still in the pool because the broker can simply call the loaned shares and force the borrower to find another lender. Additionally, dividends are not diminished by lent shares because the borrower is forced to pay the forgone dividend to the lender. There is, however, trouble with voting -- you can't vote shares you don't own, and your broker can't vote shares on your behalf if he doesn't own them either. So in effect, your voting power is diminished by the percentage of shares lent. If you don't want your broker lending out your shares you can use a cash account instead. This puts the shares in your name, but you lose your ability to sell shares before the purchase has settled 2 business days later. Additionally you can't short-sell or borrow money. None of these are a great hindrance to a long-term investor though, so it may be worth the trouble.
  • URSpider94 16y ago
    I've always seen the first transaction between A and B described as "borrowing", since no money changes hands at that stage. You asked whose shares you are using to place the short. Mechanistically speaking, you, the short-seller, have to locate people willing to loan you the shares in return for some sort of consideration, usually a small interest payment. In practice, brokerages perform this service for you, often by using shares owned by other clients "on margin" (with credit from the brokerage). Your broker can probably give you, upon request, an "easy-to-borrow" list, showing the stocks that can be shorted without concern for how to cover your position. In practice, short lenders usually don't participate knowingly in the short sale -- as mentioned above, they are often just other investors who own shares on margin (credit). So, they are generally hoping that the price of the share goes up (that's why they own the stock), but lending shares for a short sale has no connection with a particular market outlook.
• megablast 16y ago
  Regular investing in the stock market is when you buy some stock, believing it will go up, so you can sell it at a profit at a later date. If you believe the price of a stock will go down, then you can short it. This involves the opposite of regular investing, selling high first, then buying low later. To do this, you borrow the stock of someone else, with an agreement to pay them the stock back at a later date. You sell it straight away, then when the time comes to return the stock to the lender, when hopefully the stock price has gone down, you buy it back form the stock market, and give it back to the lender. The lender of the stock usually gets some fee for lending it to you. They benefit, since they are just holding onto stock for the long term anyway. Naked short selling is when you don't make an agreement to borrow the stock in the first place. The losses you can receive from shorting stock can be huge, is the stock you sold goes up by a lot.
  • lrm242 16y ago
    The losses you can receive from buying a stock can be huge. The stock you bought could go to 0.
    • mseebach 16y ago
      The upper bound on what you can loose from a long strategy is the money you invested. No such bound exists on a short strategy. If you sell short at $1, and the next day something happens and the stock jumps to $5, or you end up in a short squeeze, you could bankrupt yourself.
  • cynicalkane 16y ago
    Regular investing in the stock market is when you buy some stock, believing it will go up, so you can sell it at a profit at a later date That's speculation, not investing. I think it's important people understand the difference.
    • charliepark 16y ago
      That's only speculation to the extent that any investment is speculative. I don't play the market ... I buy mutual funds for my Roth IRA, and I sit on them. And sit on them. And sit on them. But if you were to reduce my actions down to the bare basics, it would sound just like the initial comment: "you buy some stock, believing it will go up, so you can sell it at a profit at a later date". Just because my window is 30 years, and not 30 days, it doesn't change the basic mechanics or principles.
• px 16y ago
  The concept could be illustrated this way (ethical considerations aside): Let's say that there is a high demand for electric generators after a hurricane. You "borrow" as many generators from out of state friends as you can, and proceed to sell them at a premium (let's say $1500 each). After some time passes you find them on sale at Home Depot for $500. You buy enough of them to return to everyone you originally borrowed from, making a tidy profit in the process. To answer the question more directly, short sellers borrow stocks from other stockholders. And, yes, the people lending the stocks are hoping for the stocks' success.
  • stcredzero 16y ago
    Let's say that there is a high demand for electric generators after a hurricane. Are you also from Houston?
• mvalente 16y ago
  To make money with stocks you want to buy cheap/low and sell for more/higher. It doesnt have to be in that order. If you expect a stock value to go down lower than X dollars, you commit to sell them stock at >X$ (without owning) and, when the time comes and your expectations (about the stock going down) become true, you buy for <X$ and sell the stock for >X$. -- MV
• dmitri1981 16y ago
  There is pretty interesting illustration of Naked Short Selling here: http://www.rollingstone.com/politics/news/12697/64824?RS_show_page=0 http://www.rollingstone.com/politics/news/12697/64824?RS_sho...
• michaelcampbell 16y ago
  The mechanics have been adequately explained already so no need to go into that again. One thing that should be pointed out (and this is no indictment of shorting; I do it on occasion) is that since a stock can only go down to $0, there is limited profit. It can theoretically go up without bound, so there is a risk of losing without bound too. Practically, these risks are limited, but also practically, the maximum profit is also.
• gte910h 16y ago
  You borrow stock from someone (or your broker does) and you then sell the borrow stock. You give someone (usually your broker) a promise to give them back the stock at a later date. That's it. In it's entirety. Depending on the value of your portfolio/margin account, if the value of the stock goes up too much, they may ask for more collateral, etc. But other then that, there isn't anything to it. Shorting a stock is a bet against the price of the stock. Honestly, it doesn't make sense as much as buying a put option in many cases, but sometimes it does. http://en.wikipedia.org/wiki/Put_option http://en.wikipedia.org/wiki/Put_option
• mechanical_fish 16y ago
  I just wrote a stock prediction system Oooh, a bankruptcy engine! The most prominent art form of our times. ;) You seem to understand that you've become dangerous to yourself and others. Be sure to keep listening to those thoughts. Just in case, you might want to get a tattoo: Past performance is not necessarily indicative of future results.
  • lrm242 16y ago
    You do realize you're simply repeating commonly held bullshit wisdom, right?
    • gamache 16y ago
      For the vast majority who hold this common wisdom, it is not bullshit at all.
    • dtby 16y ago
      I love you; you pay my rent.
    • clistctrl 16y ago
      As someone who has also tried to write one, I'll agree with his statement. Often following the technicals works very well. But if you know nothing about the fundamentals, one of these days you're going to end up making a very bad trade. I wrote my system so as to limit my losses. Which seems to work well. In my opinion the best way to trade is to make a decision to enter/exit the market based on fundamentals, and use technicals to decide how you do so.
      • tjmaxal 16y ago
        but you have to remember the vast majority of trades are made by humans and the vast majority of humans are emotional not always logical creatures. So the technicals which don't account for human emotions are bound to be wrong a certain (usually large)percentage of the time.
• fexl 16y ago
  I'm a hedge fund accountant, and my software follows many thousands of trades including short sales. I know exactly how to account for these trades, but I have no idea what's really going on. As an accountant, all I see is that someone sold 1200 XYZ shares at $23.00 each, receiving a grand total of $27,600 cash. To simplify the example, I am not subtracting any commission there. Now the funny thing is, this account didn't have any XYZ shares before the trade. Nevertheless the trade happens, and the account has -1200 XYZ shares, and $27,600 more cash than it had before. At that moment, the account has incurred a liability to buy back 1200 XYZ shares -- eventually. The account can hold this liability indefinitely, so long as it has enough total capital to reassure the brokerage that it can easily buy back the 1200 XYZ shares at any time. I've read the stories about "naked short selling," and how that's a giant scam because the seller doesn't even have to locate any shares to borrow. In this telling of the story, the seller is issuing brand new shares and selling them into the market -- in effect, counterfeiting. I spoke with a very experienced money manager about this, and that's his take. I also spoke with a friend who is very wise about markets, and he had an entirely different take. He made the point that no matter how the short sale occurs, either "naked" or "covered", in both cases the seller ends up with the liability of -1200 XYZ shares, so what's the difference? The only difference is that if the short sale is naked, the seller owes the shares to the buyer. But if the short sale is covered, the seller owes the shares to the lender. Either way it's a liability of -1200 XYZ shares, and the only difference is to whom the shares are promised. Now I'm a rational man, so it bothers the hell out of me to agree with both sides of a contradiction. So what gives? I don't know. The only other shred of evidence I have, and it's a very small shred, is the phenomenon of "Payment in Lieu of Dividends." If I have negative quantity of shares, and those shares pay a dividend, then that dividend is charged to my account as an expense. Normally, as an accountant, I see that as a simple negative dividend, which we call a "Dividend Expense." But sometimes I see those negative dividends labeled "Payment in Lieu of Dividends." I read an article once saying that the only difference is that "payment in lieu" occurs when the shares were sold short in a "naked" fashion. So maybe, just maybe, there is a real difference between the two forms of short sales, as my money manager friend asserts. The money manager asserts that naked short selling actually increases the total supply of shares, even past the official "float" of shares issued by the company! The people at the Gold Anti-Trust Action Committee (GATA) even claim that short sellers are creating this artificial counterfeit supply in the gold market. I would suggest calling their bluff and redeeming the physical gold into allocated Swiss storage -- but lo and behold, these financial instruments have no redemption contract. They're cash-settled only. How conveeeeeenient. You asked if the people lending the shares actually hope for the stock's success. Of course they do. If someone borrows 1200 XYZ shares and sells them, the lender still has an asset of 1200 XYZ shares, and clearly still wants their price to rise. The seller has a liability of -1200 XYZ shares, and clearly wants their price to fall. The buyer has an asset of 1200 XYZ shares, and clearly wants their price to rise. Note that in my example there, the total net quantity of shares in the three accounts involved is precisely 1200, both before and after the short-sale. So where is this alleged increase in supply from short-selling? Perhaps there's no increase in this case because it wasn't a naked short sale. OK fine, let's make it a naked short sale. A trader simply sells 1200 XYZ shares without either having them or bothering to borrow them. Another trader buys those 1200 XYZ shares. Now the seller has a liability of -1200 XYZ shares, and the buyer has an assert of 1200 XYZ shares. So after the short sale, the total net quantity of XYZ shares in those two accounts is precisely 0. But the net quantity was precisely 0 before the short-sale as well! So once again, where oh where is this alleged increase in supply caused by short-selling?
• elecengin 16y ago
  I think there are plenty of good descriptions of the basics of short selling here, but I wanted to help explain the "who are you borrowing from" aspect. When you trade, you must trade through a broker-dealer. A broker-dealer is authorized to trade on behalf of it's customers. A broker-dealer must uphold certain regulatory requirements put in place by the SEC, and policed by a variety of government and non-government entities, including organizations like FINRA. Originally, shorting was managed by the broker-dealers. It was the responsibility of the broker-dealer to manage finding an entity to "borrow" the stock from (usually a large institutional client). These institutional clients own very large positions in the stock, and the broker-dealer normally provides a guarantee that it will be returned. If for some reason this process was mismanaged, when the trades cleared and settled, there would be a "fail to deliver" (meaning they weren't able to come up with the stock) This is a severe problem for the broker-dealer, and can result in them losing their license. Abusing this system became known as "naked shorting" where you never made an attempt to "locate" (borrow) the stock. Naked shorting was severely curtailed in 2005 under Regulation SHO. You may also be curious how a customer knows what stocks its broker-dealer can borrow. Originally there was a black-list of sorts called the Hard-To-Borrow list. This list was stocks that were relatively illiquid and that couldnt be shorted freely. If you wanted to short these, you had to request a "locate" from your broker for a specified number of shares, and they would go looking for someone to provide it, and confirm how many shares they could find. Under Regulation SHO, this changed to a white-list "Easy-To-Borrow" model where you were only allowed to short stocks on the list freely and had to request locates for the remainder of the symbol universe. Finally - another interesting note on shorting called the "uptick rule". The uptick rule was originally put into place in the 1980's under Rule 390. This rule was built to prevent a stock from being run into the ground by repeatedly shorting it while the price was already falling. It required that in order to short, the previous print (quote) must have been higher than the one before (the stock was heading up). This really didn't help the problem too much, and was repealed in 2007.
  • hga 16y ago
    Wikipedia matches my memory that the uptick rule was established in the '30s: http://en.wikipedia.org/wiki/Uptick_rule http://en.wikipedia.org/wiki/Uptick_rule
• djb_hackernews 16y ago
  Going to get down voted here but is anyone else concerned that we have people building price prediction systems and hedge fund accountants that admit they don't have a complete understanding of what a short sale is?
  • gxti 16y ago
    It's not that complicated, people are just too proud of their ignorance to bother learning (OP excepted since he went to the trouble of asking).
  • fexl 16y ago
    I won't down-vote you, even though I'm that hedge fund accountant you're talking about. :) Even without knowing all the minute intricacies of how the share lending occurs, my accounting results can still pass audits with flying colors, year after year. Just in case anyone thinks I'm proud of my "ignorance," I'm not. I'm discussing things here in order to gain a better understanding, even though that understanding is not crucial to my performance as an accountant. And yes, I am concerned about the current sorry state of so-called "markets."
  • retube 16y ago
    When I worked in banking risk, accounting, finance, audit etc had very little understanding of the business, basic pricing & risking, market mechanics etc.
  • ontheroad 16y ago
    If I'm a web developer but I have no idea how CPUs actually work or how a Cisco router sends my packets around the world, does that mean we should be concerned about the stability of the Internet?
• knieveltech 16y ago
  The article linked below describes Porsche's short squeeze and contains one of the best explanations of short selling I've come across to date. http://radian.org/notebook/porsche http://radian.org/notebook/porsche
• tarkin2 16y ago
  1. You borrow 100 shares from a broker. 2. You sell the 100 shares for, say, £1000 in total. 3. Prices for the share ideally go down. (You and others have been selling, after all) 4. You then buy 100 of the shares for, say, £900 in total 5. You then give the broker the 100 shares back 6. You've made £100 Normally the broker would charge a commission for the lending, hence his/her motivation. So if the commission were £10 you'd have £90 profit. Naked short selling is when you miss out the broker. So you don't owe the broker anything, but you still need to give the buyer of your fictional shares something real, so you end up buying them, at a hopefully lower price, later. Defenders of short-selling claim it helps quickly respon to fundamentals in the market place. For instance once we heard the US might fine BP people could start selling BPs shares without owning them (yet).
  • captaincrunch 16y ago
    Thanks, this is exactly what I was looking for. I'm also glad, that I am not the only one confused about this type of trade. What if the lender decided to sell the stocks that he had lent out? Would the trade need to be closed for the short seller, or would he have to repay immediately and short sell a new lenders stock?
    • d2viant 16y ago
      It depends on where the shares were borrowed from. Either they were borrowed from the brokerage firms inventory or they were borrowed on margin from another clients account. If they're borrowed from the firms inventory, it's unlikely the short seller will be affected, because the firm will just have you borrow against different shares in their same pool of inventory. If they have no more left, they can borrow from another firm. In the very unlikely scenario that the firm decides to not hold ANY more shares of that company, then you may get called on the stock. In the second scenario, if you're borrowing from another client, however, you may be at risk of getting a margin call -- in which case you would need to purchase the shares on the open market at their current price and return them to the lender.
      • captaincrunch 16y ago
• fr0sty 16y ago
  A few things: (and it seems lots of folks here know just enough to be dangerous) 1. Naked Short Selling is illegal. There is an exception for market makers that allows them to trade naked shorts but that is beyond the scope of this discussion. 2. All short selling done by retail customers, hedge-funds, etc. is all 'covered short selling'. This means that the stock being sold is first 'borrowed' from a third party. The third party is paid interest on their loan of stock which is their incentive for loaning it out. 3. There is no absolute time limit on the duration of a short position, but long-term short positions are difficult to hold because you still have to pay interest on the stock your borrowed which eats into potential profits.
• bismuth 16y ago
  You borrow from large institutional investors. These funds just own large amounts of stock in the hopes of achieving a profit through dividends and growth of the company. A trader who wants to short a stock can borrow some of this stock for a fee. Everybody wins this way. The large institutional collects the borrow-fee, and the trader can profit from a decline because he has borrowed the stock. [pet peeve] Note that naked short is actually mathematically equivalent to (naked) long only with a minus sign. For example: every publicly traded company is naked short it's own stock from the day it goes public (collecting a huge heap of cash in exchange for selling the stock). Another example: Everybody owning stock (or anything really) is also short cash (unless they borrow money to buy it). So all people long [insert company name here] are short [insert currency here] i.e. they will profit when [currency] drops wrt to [stock]. Those unpatriotic bastards! [/pet peeve]
  • fexl 16y ago
    True. When you buy IBM on margin, you're shorting USD. So if they reinstate the uptick rule for short selling, shouldn't they add a downtick rule for margin buying? :)
• cschneid 16y ago
  Regarding who the shares are borrowed from, from my understanding, any client who signs a margin account agreement also signs something that says "sure, you can borrow my shares, and lend them to another person". Your account will never show it, and presumably there's no way to actually lose those shares (between insurance, and the margin allocated on the borrowers side). As other people say "large institutional" investors most likely provide a nice pool of shares as well, which their agreements with the brokerage allow to be shared out.
• ilitirit 16y ago
  Related: http://radian.org/notebook/porsche http://radian.org/notebook/porsche
• coreyrecvlohe 16y ago
  Simply put, a short sale is borrowing a stock from an institution, and selling it on the market with an obligation to cover the sale (return the value of the stock back to the borrowed party). Now if the price of the stock goes up after you sold it, depending on how wide the margin becomes, you can stay in the contract, but guarantee more cash to the provider so that they are confident you will be able to cover it the future. If the stock goes down, you can close the contract and return the value of the sale back to the institution, and effectively pocket the retained cash value of the purchase from when you first sold the stock short; turning a profit from a decline in price. Often times there are companies out there that are running on fumes, overvalued, or are partaking in fraud; short selling is a useful tool that can help the markets discover new information about possibly shaky institutions.
• T_S_ 16y ago
  You can borrow money from a friend. Right? You can borrow stock from anyone who holds it. If your friend wants his money back, you can pay him cash and the bills don't have to have the same serial numbers as the ones you borrowed. Same with stock. (Entrepreneurs note: You are currency issuers. Think about that.) The main difference is that everyone holds their shares at a broker so they let the broker handle this loan for them. You borrow the shares via the broker, the broker sells them, and then lets you have access to some of the proceeds (limited by regulation) and uses the rest as a low interest loan to itself. Small brokerage accounts get nothing out of this even though they lent the shares. That's probably the main reason it seems so mysterious. Most people aren't aware of the mechanism. Your pension fund or insurance company is aware and makes sure they get a cut of the benefits of share lending.
• retube 16y ago
  I used to trade bonds (amongst other stuff) so I can tell you how it works for bonds. Presumably it's similar for stocks: As you know, going short means you sell the bond/stock. Generally going short implies you are going negative, as opposed to selling inventory you already own. So if I go short 100 million 10y bunds (German government debt) this means I sell 100m bonds I don't have. The guy I am selling to doesn't know I am going short, he just knows I've sold him the bonds and he expects delivery at the end of the day (or possibly in 1 or 2 days time, depending on the definition of "spot" and various other things). So I have to deliver him 100m bonds I don't have. Where do these come from? This is where the "repo" or repurchase market comes in to play. Very simply, the repo market is short-term buy/sell market: Party A agrees to sell Party B some bond at some price, AND additionally agrees to buy it back a short while later for a slightly higher price. What Party A has effectively done is borrow money from B and put up the bond they own as collatoral. So what happens after I short my bond is that I go to the repo traders and say "hey - I'm short 100m bunds, you need to do a repo trade to flatten my position". So these guys will loan out some cash (around 100m euros) and take as collateral 100m bunds. These I use to deliver to my seller. Edit: In reality I don't tell the repo traders I've gone short a bond. It's their responsibility to make sure all positions are repo'd out. They see a netted view of all bond positions across the bank and repo just the net positions.
• cadr 16y ago
  I think the idea is that the people lending are planning to hold onto those stocks over a long period of time, so they are hoping that in the long run the stock price goes up. While they are holding onto them, money can be made by lending out the stock. The security lender will lend stock, get a fee for doing so, and will hedge against risk by getting collateral for the stock they lend.
• ct4ul4u 16y ago
  There are many sources of stock for stock loan. 25 years ago, the primary source was stock in the margin accounts of investors. Today, nearly every large holder of stock loans it out. The reason they loan it out is to make more money. Virtually every broker/dealer (b/d) that holds their own accounts has a stock loan desk (small to medium sized firms frequently have their accounts an another firm's books on a fully-disclosed basis). Virtually all large index fund managers have a stock loan desk as well. The stock loan desk at a b/d will loan stock to the firm's customers from the available shares (more on that in a moment) or it will find another place to borrow the shares from on behalf of the customer. This can involve looking in a system called Loannet or merely calling up other participants in the market. The original source of available shares was the margin accounts of customers. The amount of stock available for loan depends on the amount of funds loaned to the customers. The stock loan activity is completely invisible to the customer whose account the shares are taken. Don't want your shares loaned? Don't use a margin account. Stock loan is the financing mechanism that provides the funds loaned to you for your margin account. Securities can also be loaned from fully-paid (non-margin) accounts of customers with the written consent of the customer. It's a pain in the ass from a regulatory and operational point of view. It's usually only done if the customer has a really large holding in a hard to borrow stock. The customer generally negotiates a share of the revenue from the transaction. In the past 25 years, institutional investors have started to loan stock as well. The pioneers were index funds, but it has spread to most other fund types. The big institutional investors generally set up their own desk and participate in the market directly. Being a direct participant can improve their ability to borrow stock as well. The borrowing party puts up collateral (100-110%) for the stock and the lending firm either uses the funds to finance the margin business or puts it in a limited class of interest bearing accounts (I forget the name and regulation) at a bank. The borrowing party gets the stock and promptly sells it. The amount of the collateral is trued up to the value of the borrowed shares on a regular basis, so the risk to the lender is small. So it is clear that one reason to loan the shares is financing. The second reason is revenue. The revenue comes from the interest earned on the collateral. The interest on the collateral belongs to the lender except for a negotiated "rebate". For most stock, the rebate is generally 10 to 25 basis points less than the overnight benchmark (fed funds). The lender keeps what they can earn over the rebate. Notice that I said "for most stocks". Some stocks can be hard to borrow. The supply can be low because large amounts of the stock are held in non-margin accounts or by investors who don't loan it out. The demand can be high because there is a large amount of short interest in the stock already. The negotiated rebate on hard to borrow shares can be negative, and not just a few basis points. The negative rebate for a really hard to borrow can be negative 10 percent and worse. And a negative rebate means that you're paying somebody interest to hold your money as collateral. This can be very lucrative for index funds based on a broad index like the Russell. It's one reason index fund fees are so low. At the other end of the scale is generally available stock. Known as GC (general collateral), loan transactions in this stock are usually initiated by a stock lender looking for financing. From a b/d point of view, stock loan is one aspect of a business called prime brokerage. Prime brokerage is a bundle of custody, operational, financing, and loan services offered to hedge funds. One note, the perspective I've provided is largely from the institutional trading side of the b/d business. Retail investors borrowing stock will generally see a tier of rebates (I think the most common rebate is zero).
• deleted 16y ago
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• hernan7 16y ago
  Not sure if it's 100% relevant, but this was a fun/semi-informative read on shorting stocks: http://www.wired.com/wired/archive/8.04/dumb.html http://www.wired.com/wired/archive/8.04/dumb.html
• bernardlunn 16y ago
  Naked Short Selling needs a new name. It sounds like Short Selling which is quite legitimate way to bet that a stock price will decline. Markets need traders who will spot problems at say Enron and bet against them. But Naked Short Selling is simply fraud. It needs a new name.
  • artsrc 16y ago
    What is the difference if you arrange the loan required to short sell before of after you do the short sale?
• deleted 16y ago
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• tmsh 16y ago
  the key is equivalence, rights of ownership and contracts, standardized at 2 or 3 different levels.
• artsrc 16y ago
  Before you take a position in a stock you should research the stock to find out what it is worth. If a share is worth more than the current price you should buy it. If it worth less than the current price you should short sell it. If you don't short sell, then half of your research is wasted.