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In reply to the discussion: I know little-to-nothing about stock trading. Can someone please give me the "Dummie's" version of [View all]Yavin4
(37,182 posts)21. The concept of Short Selling is not limited to just stocks.
There are a number of ways of achieving a short position. The most fundamental method is so-called "physical" short-selling, which involves borrowing assets (often securities such as shares or bonds) and selling them. The investor will later purchase the same number of the same type of securities in order to return them to the lender. If the price has fallen between the time of the initial sale and the time the equivalent securities are repurchased, the investor will have made a profit equal to the difference. Conversely, if the price has risen then the investor will bear a loss. The short seller must usually pay a fee to borrow the securities (charged at a particular rate over time, similar to an interest payment), and reimburse the lender for cash returns the lender would have received had the securities not been lent out, such as any dividends that would have been payable to the lender if they were still the holder of shares that they had lent out.
Short positions can also be achieved through futures, forwards or options, where the investor can assume an obligation or a right to sell an asset at a future date at a price that is fixed at the time the contract is created. If the price of the asset falls below the agreed price, then the asset can be bought at the lower price before immediately being sold at the higher price specified in the forward or option contract. A short position can also be achieved through certain types of swap, such as contracts for differences. These are agreements between two parties to pay each other the difference if the price of an asset rises or falls, under which the party that will benefit if the price falls will have a short position.
Short positions can also be achieved through futures, forwards or options, where the investor can assume an obligation or a right to sell an asset at a future date at a price that is fixed at the time the contract is created. If the price of the asset falls below the agreed price, then the asset can be bought at the lower price before immediately being sold at the higher price specified in the forward or option contract. A short position can also be achieved through certain types of swap, such as contracts for differences. These are agreements between two parties to pay each other the difference if the price of an asset rises or falls, under which the party that will benefit if the price falls will have a short position.
https://en.wikipedia.org/wiki/Short_(finance)
The concept is that you are "renting", "borrowing", or gaining the value of an asset today while taking on the liability of paying back said asset at a future time at the value of that asset in the future.
Again, why are you so hostile? Is it because I got some praise for my post? Is that it? Are you that petty?
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I know little-to-nothing about stock trading. Can someone please give me the "Dummie's" version of [View all]
Progressive Jones
Jan 2021
OP
When it comes to trading stocks, you can take a short position on the direction of the stock.
Yavin4
Jan 2021
#1
great summary--I'd just add they "borrowed" so many shares they cornered the market on themselves
fishwax
Jan 2021
#6
The point of my post was to explain short selling in terms that a lay person can understand
Yavin4
Jan 2021
#19
Thanks !!! A couple more questions that came to me while reading your explanation.
Progressive Jones
Jan 2021
#9
Thank you! I've been looking for an explanation of "this week" all week, but everywhere..
LAS14
Jan 2021
#26
Is the "bag of sugar" shares of stock, or cash against shares already owned by the borrower? nt
Progressive Jones
Jan 2021
#11
Thanks much. I don't know where I got "a few weeks" from, probably that came from some kind
progree
Jan 2021
#37
Thanks ! Yeah, I got that part. I just wasn't clear if the loan was cash or stock. Got it now. nt
Progressive Jones
Jan 2021
#42