5 ms·

I'm not an investor in SpaceX but I don't think shorting stocks at IPO should be allowed. The market should be given time to settle on a price, and it's unlikel

by tyre 3mo ago

I'm not an investor in SpaceX but I don't think shorting stocks at IPO should be allowed. The market should be given time to settle on a price, and it's unlikely that anyone needs to short it on day 1 for hedging. It's purely price speculation. Yeah, I know why people _want to_ (betting), but it doesn't serve a broader economic purpose.

toomuchtodo 3mo ago
Why is line go up price discovery acceptable, but line go down price discovery not? If the shares are trading, you should be able to short, it’s arbitrary to disallow it. It is quite literally a part of the market settling on a price. (under the assumption your broker is managing their risk if your losses from a short position potentially exceeds capital available for liquidation if the trade moves against you)
- fastball 3mo ago
  Line go down discovery is acceptable (that is what selling a share is). The reason you might not want options trading very early after an IPO is because the market is frothy enough without the additional layer of complexity.
  - toomuchtodo 3mo ago
    Certainly, its reasonable for a delay in options being available while market makers prepare to make the market for those options. But shorting? Day 1, the shares are trading and available to borrow to sell to short.
    - inigyou 3mo ago
      Are they actually? How many intermediate steps are involved in finding shares to borrow for a short? I imagine they have to be transferred to some central depository with the feature, for a start, and that takes 2-4 days
      - toomuchtodo 3mo ago
        Your broker will locate and borrow the shares from an available pool (such as other clients' portfolios), sell them on your behalf, and hold the cash. They don't have to go to the clearinghouse.
- somenameforme 3mo ago
  Because lines tend to trend up over time. You're betting on lines going down, and paying rent while doing so as shorting requires you to rent/borrow shares from somebody else. It's an extremely high risk activity that can easily result in an investor losing a very large amount of money. Elon Musk is politicized so you're going to have people wanting to short against him, for reasons other than it being seen as a rational and sound investment strategy. This is one reason brokers tend to restrict this activity to certain types of investors who are more able to appreciate the risks, to say nothing of baseline necessities like needing a margin account to cover potential losses. Shorting is just very different than buying a stock.
tclancy 3mo ago
Betting is what everyone who jumped into retail investing and meme stocks does with it, but shorts are a valuable tool in the economy for hedging risk. It also is a good indicator for fraud too.
reactordev 3mo ago
Going long or going short is your bet on the market. If you can go long, you should be allowed to go short. Restrictions on any trading means you don’t have confidence in the price in which case it shouldn’t be available for trade.
lordnacho 3mo ago
To settle on a price, you need smart investors to be able to push it either way, which they need shorting and leverage for. Plus there's option traders who naturally need to go short sometimes.
shafyy 3mo ago
Isn't it all speculation always though? That's why stock picking doesn't work and ETFs are popular.
shermantanktop 3mo ago
“Broader economic purpose”? It’s all betting. If someone wants to dress it up in jargon or talk about beneficial second order effects, they can. But if putting money on an outcome you can’t control isn’t gambling, I don’t know what is.
- KellyCriterion 3mo ago
  Mh.... is there a difference between "betting" and "gambling" from wording here?
- names_are_hard 3mo ago
  Is buying insurance gambling? Is giving your second cousin 100k some money so he can open up is restaurant gambling if you expect a percent of the profits but won't actively be involved in advising him on running the business?
  - shermantanktop 3mo ago
    Yes.
- quickthrowman 3mo ago
  Gambling is placing a wager with a negative expected value. If you can gain an edge and have positive EV, it’s not gambling. That’s the distinction between poker and slots. A skilled poker player can take advantage of positive EV positions while slots are programmed to have negative EV. There are traders that have positive EV bets.
clickety_clack 3mo ago
The market “settling on a price” includes the actions of short sellers.
- inigyou 3mo ago
  Do I need to be able to short bananas for the market to settle on the price of a banana?
  - notahacker 3mo ago
    If you're confident the price of bananas will fall tomorrow you absolutely can sign a contract to deliver bananas next week at the current price and then buy them when the price drops...
    - wredcoll 3mo ago
      Yes, you can but does that ability benefit the population/nation/market as a whole?
      - notahacker 3mo ago
        Well yes, to the extent the possibility to do that helps stop silly price spikes from a very short term shortage of bananas.
      - clickety_clack 3mo ago
        Yes, because the guy buying your bananas is able to make banana-buying decisions for next week based on the price you give him. You’re not going to make up a silly low number because you actually have to buy the bananas yourself at some point, and you help price discovery because now that guy isn’t buying bananas at a higher price than someone is willing to sell them for.
        wredcoll 3mo ago
        Just as a thought experiment, would you say there are any (societal) negatives to the possibility of thr price of bananas (or the share price of spacex) being able to fluctuate wildly based on semi-abstract economic manipulations, like shorts and futures and such. What I'm getting at is when does it go from investing, "I think this entity is going to take my money and use it to build a profitable factory that will then return to me a share of the profits", to just gambling "I think this stock price will change by the end of the day and I'm going to bet on it", and what are the positives and negatives of that?
positr0n 3mo ago
The market will more efficiently settle on a price if market participants can push the price up (buying) and push the price down (shorting).
wat10000 3mo ago
Borrowing and selling are both pretty straightforward financial actions. It seems strange to say you're not allowed to combine the two.
wredcoll 3mo ago
I'm not certain you're right, but I think this opinion deserves considerably more (fair) discusson than it's getting. Lots of replies either personally benefit or just assume the "way things are" is the best, but the stock market has gotten highly abstracted from the original intention of providing capital to grow companies via means other than bank loans. I get the argument that shorts and friends help make the price the stock is being sold at more accurate, and I believe there's some truth there, but also we constantly see stock prices fluctuate by 10+% in a single day and I have trouble believing the actual value of all these companies changed that much in a single 24 period.
- names_are_hard 3mo ago
  Well the idea that the price of a stock represents the actual value of the company can be complicated but the realization that it's super hard to figure out what the actual value of a company really is, because figuring that out really requires a crystal ball, because you need to know exactly how much money the company will earn in the future, among other things. None of us have that crystal ball, so market participants try to guess at the future. It's not difficult to believe that those guesses can swing a lot in a single day. Just trying to figure out whether or the Hormuz will be open next week can give you whiplash.
8note 3mo ago
the company manipulates itself to look its best possible, taking long term bad decisions in order to juice the value, and wont have more immediate items to juice the share price again for a while its a reasonable expectation that 3 months after an IPO the price will be lower than it was at IPO not really a bet so much as that on average the prices at IPO are a local maxima

by tyre 3mo ago

toomuchtodo 3mo ago

Why is line go up price discovery acceptable, but line go down price discovery not? If the shares are trading, you should be able to short, it’s arbitrary to disallow it. It is quite literally a part of the market settling on a price. (under the assumption your broker is managing their risk if your losses from a short position potentially exceeds capital available for liquidation if the trade moves against you)

fastball 3mo ago
Line go down discovery is acceptable (that is what selling a share is). The reason you might not want options trading very early after an IPO is because the market is frothy enough without the additional layer of complexity.
- toomuchtodo 3mo ago
  Certainly, its reasonable for a delay in options being available while market makers prepare to make the market for those options. But shorting? Day 1, the shares are trading and available to borrow to sell to short.
  - inigyou 3mo ago
    Are they actually? How many intermediate steps are involved in finding shares to borrow for a short? I imagine they have to be transferred to some central depository with the feature, for a start, and that takes 2-4 days
    - toomuchtodo 3mo ago
      Your broker will locate and borrow the shares from an available pool (such as other clients' portfolios), sell them on your behalf, and hold the cash. They don't have to go to the clearinghouse.
somenameforme 3mo ago
Because lines tend to trend up over time. You're betting on lines going down, and paying rent while doing so as shorting requires you to rent/borrow shares from somebody else. It's an extremely high risk activity that can easily result in an investor losing a very large amount of money. Elon Musk is politicized so you're going to have people wanting to short against him, for reasons other than it being seen as a rational and sound investment strategy. This is one reason brokers tend to restrict this activity to certain types of investors who are more able to appreciate the risks, to say nothing of baseline necessities like needing a margin account to cover potential losses. Shorting is just very different than buying a stock.

tclancy 3mo ago

Betting is what everyone who jumped into retail investing and meme stocks does with it, but shorts are a valuable tool in the economy for hedging risk. It also is a good indicator for fraud too.

reactordev 3mo ago

Going long or going short is your bet on the market. If you can go long, you should be allowed to go short. Restrictions on any trading means you don’t have confidence in the price in which case it shouldn’t be available for trade.

lordnacho 3mo ago

To settle on a price, you need smart investors to be able to push it either way, which they need shorting and leverage for. Plus there's option traders who naturally need to go short sometimes.

shafyy 3mo ago

Isn't it all speculation always though? That's why stock picking doesn't work and ETFs are popular.

shermantanktop 3mo ago

“Broader economic purpose”? It’s all betting. If someone wants to dress it up in jargon or talk about beneficial second order effects, they can. But if putting money on an outcome you can’t control isn’t gambling, I don’t know what is.

KellyCriterion 3mo ago
Mh.... is there a difference between "betting" and "gambling" from wording here?
names_are_hard 3mo ago
Is buying insurance gambling? Is giving your second cousin 100k some money so he can open up is restaurant gambling if you expect a percent of the profits but won't actively be involved in advising him on running the business?
- shermantanktop 3mo ago
  Yes.
quickthrowman 3mo ago
Gambling is placing a wager with a negative expected value. If you can gain an edge and have positive EV, it’s not gambling. That’s the distinction between poker and slots. A skilled poker player can take advantage of positive EV positions while slots are programmed to have negative EV. There are traders that have positive EV bets.

clickety_clack 3mo ago

The market “settling on a price” includes the actions of short sellers.

inigyou 3mo ago
Do I need to be able to short bananas for the market to settle on the price of a banana?
- notahacker 3mo ago
  If you're confident the price of bananas will fall tomorrow you absolutely can sign a contract to deliver bananas next week at the current price and then buy them when the price drops...
  - wredcoll 3mo ago
    Yes, you can but does that ability benefit the population/nation/market as a whole?
    - notahacker 3mo ago
      Well yes, to the extent the possibility to do that helps stop silly price spikes from a very short term shortage of bananas.
    - clickety_clack 3mo ago
      Yes, because the guy buying your bananas is able to make banana-buying decisions for next week based on the price you give him. You’re not going to make up a silly low number because you actually have to buy the bananas yourself at some point, and you help price discovery because now that guy isn’t buying bananas at a higher price than someone is willing to sell them for.
      - wredcoll 3mo ago
        Just as a thought experiment, would you say there are any (societal) negatives to the possibility of thr price of bananas (or the share price of spacex) being able to fluctuate wildly based on semi-abstract economic manipulations, like shorts and futures and such. What I'm getting at is when does it go from investing, "I think this entity is going to take my money and use it to build a profitable factory that will then return to me a share of the profits", to just gambling "I think this stock price will change by the end of the day and I'm going to bet on it", and what are the positives and negatives of that?

positr0n 3mo ago

The market will more efficiently settle on a price if market participants can push the price up (buying) and push the price down (shorting).

wat10000 3mo ago

Borrowing and selling are both pretty straightforward financial actions. It seems strange to say you're not allowed to combine the two.

wredcoll 3mo ago

I'm not certain you're right, but I think this opinion deserves considerably more (fair) discusson than it's getting. Lots of replies either personally benefit or just assume the "way things are" is the best, but the stock market has gotten highly abstracted from the original intention of providing capital to grow companies via means other than bank loans. I get the argument that shorts and friends help make the price the stock is being sold at more accurate, and I believe there's some truth there, but also we constantly see stock prices fluctuate by 10+% in a single day and I have trouble believing the actual value of all these companies changed that much in a single 24 period.

names_are_hard 3mo ago
Well the idea that the price of a stock represents the actual value of the company can be complicated but the realization that it's super hard to figure out what the actual value of a company really is, because figuring that out really requires a crystal ball, because you need to know exactly how much money the company will earn in the future, among other things. None of us have that crystal ball, so market participants try to guess at the future. It's not difficult to believe that those guesses can swing a lot in a single day. Just trying to figure out whether or the Hormuz will be open next week can give you whiplash.

8note 3mo ago

the company manipulates itself to look its best possible, taking long term bad decisions in order to juice the value, and wont have more immediate items to juice the share price again for a while its a reasonable expectation that 3 months after an IPO the price will be lower than it was at IPO not really a bet so much as that on average the prices at IPO are a local maxima