3 ms·
would it be good idea to short the stock though?
by dangwhy 3y ago
would it be good idea to short the stock though?
- huijzer 3y agoProbably not. When you short, your potential gains are limited to 100%, but your potential losses are unlimited. "The market can stay irrational longer than you can stay solvent." - A. Gary Shilling (https://quoteinvestigator.com/2011/08/09/remain-solvent/ https://quoteinvestigator.com/2011/08/09/remain-solvent/).
- CHY872 3y agoNaked shorting certainly leads to unlimited losses, but it’s not the only kind. Simple example is that i can buy a put option in some company. If the stock price falls below that point, I buy shares and sell them to the option writer and make a profit. My maximum loss is limited to the amount I spent on the option. Likewise the put seller has not taken unlimited risk - their risk is limited to the cost of the shares they’ve offered to buy at.
- huijzer 3y agoThe most likely winner of such schemes are the brokers who sold two things instead of one. Buying great companies at fair prices is much easier and, in my opinion, safer. Another argument: how many short seller billionaires are there and how many long billionaires?
- HDThoreaun 3y agoWriting options is an incredibly competitive market, margins are very tight. The quant firms writing them only work because of the massive scale, they lose almost as often as they win.
- deleted 3y ago[deleted]
- SilverBirch 3y agoI worked at a large semiconductor company in 2013-16. It was very clear it was fucked. It took about 8 years before its stock price suffered any real headwind in its stock price. So who the fuck knows.