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I'm not too knowledgeable when it comes to finances. But isn't it possible to bet against a stock? As in someone promising you to buy stock X at price Y at futu

by dnate 8y ago

I'm not too knowledgeable when it comes to finances. But isn't it possible to bet against a stock? As in someone promising you to buy stock X at price Y at future date Z? So when the stock dips, you make money. If yes, and this is such a clear cut case (again, I know very little about finances, just going of the comments here), shouldn't this be easy money? Hell, I would bet against it if I had any betting money.

derda 8y ago
It is called short selling. Don't how/if that works in combination with an IPO.
deleted 8y ago
[deleted]
a13n 8y ago
Yep, you're talking about buying put options.
gibybo 8y ago
>But isn't it possible to bet against a stock? Yes, there are a few ways to do it. >As in someone promising you to buy stock X at price Y at future date Z? So when the stock dips, you make money. This would be either a put option or a future (depending on whether you have the option or the obligation to sell it on date Z), but it carries the risk that the market will not lower the price prior to date Z. Put options also aren't available at the same time as IPO, I believe LYFT puts won't be available until late next week. You can also short the stock, which is simply borrowing shares from someone else, selling them, then buying back the shares at a hopefully lower price to repay the loan at a later date. The advantage is that you don't have to specify a certain date, but you may be forced to pay back the loan earlier than you'd like if the price increases beyond your collateral or more people want to borrow the stock than lend it. >If yes, and this is such a clear cut case The reality is that this isn't actually such a clear cut case. There are many people with billions of dollars at their disposal betting both ways. Some will be right, some will be wrong. The price they (and everyone else) have agreed to bet against each other with will be the market price.

by dnate 8y ago

derda 8y ago

It is called short selling. Don't how/if that works in combination with an IPO.

deleted 8y ago

[deleted]

a13n 8y ago

Yep, you're talking about buying put options.

gibybo 8y ago

>But isn't it possible to bet against a stock? Yes, there are a few ways to do it. >As in someone promising you to buy stock X at price Y at future date Z? So when the stock dips, you make money. This would be either a put option or a future (depending on whether you have the option or the obligation to sell it on date Z), but it carries the risk that the market will not lower the price prior to date Z. Put options also aren't available at the same time as IPO, I believe LYFT puts won't be available until late next week. You can also short the stock, which is simply borrowing shares from someone else, selling them, then buying back the shares at a hopefully lower price to repay the loan at a later date. The advantage is that you don't have to specify a certain date, but you may be forced to pay back the loan earlier than you'd like if the price increases beyond your collateral or more people want to borrow the stock than lend it. >If yes, and this is such a clear cut case The reality is that this isn't actually such a clear cut case. There are many people with billions of dollars at their disposal betting both ways. Some will be right, some will be wrong. The price they (and everyone else) have agreed to bet against each other with will be the market price.