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If you win $300, good for you, if you win $430,000, that's even better for you, but the market doesn't really care which way that goes. However, if you lose $3
by LeifCarrotson 5y ago
If you win $300, good for you, if you win $430,000, that's even better for you, but the market doesn't really care which way that goes.
However, if you lose $300 that you brought to the table, that's your problem, too bad for you. If you lose $430,000 when you only brought $300 to the table, that's beyond being just your problem, that's the system's problem.
A system which allows this situation to happen is fundamentally flawed, it's vulnerable to exploitation and collapse if this kind of behavior allowed to go on unchecked.
- dwaltrip 5y agoDoes that ever actually happen? I thought that a margin call would come far before it reached that point, limiting the damage to any of the involved parties.
- zaat 5y agoHence there are checks and defense mechanisms in place, and a risky short position (meaning position with loss over the credit given to the position holder) will be closed by the bank/broker. Those guys in finance and regulations have been here before we were born, they managed to cover most basic stuff by now.
- burnished 5y agoI get that, but it sounds like you are answering the question you wanted to instead of "what does unlimited mean if that loss is an unlimited downside but holding a stock is not called unlimited upside".