General Discussion

jmowreader

(52,910 posts)

20. It's impossible to "short on margin"

Fri Nov 20, 2015, 06:23 AM

Nov 2015

Margin trading is borrowing money to take a larger long position in stock than you have the cash for. Shorting is borrowing stock you think is going to drop in price from your broker, selling it and caching the proceeds in your brokerage account, waiting until it drops, buying it back, and returning it.

The risk of shorting is pretty simple to understand: if the price goes through the roof like this one did, your broker is going to want that shit back, right fucking now. The ideal situation is for the company to go out of business while you've got an open short position - since the stock is now worthless you don't have to give it back, and you can keep the money you sold it for.

The risks of margin trading are too many to list here.

There are three ways for a trader to enter the More Balls than Brains Club. Margin trading is one, shorting is the second and selling unhedged naked calls is the third.

Right 'bout now I'm breaking out the world's smallest violin for this guy.

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Online trader begs for help after his short goes south [View all] FLPanhandle Nov 2015 OP

"you have to feel for this poor guy". Nye Bevan Nov 2015 #1

He did catch a monumental piece of bad luck given the dramatic price increase. Warren DeMontague Nov 2015 #8

It's impossible to "short on margin" jmowreader Nov 2015 #20

Right, of course. Got my terminology mixed up. Warren DeMontague Nov 2015 #25

Time frame? There really isn't one jmowreader Nov 2015 #29

Interesting. Thanks for the crash course. Warren DeMontague Nov 2015 #37

Exactly! That's basically saying you should feel sorry for someone and donate to them smirkymonkey Nov 2015 #34

So am I supposed to feel sorry for people that go to Vegas and lose their shirt? Rex Nov 2015 #2

The difference is that Vegas casinos will often reduce the amount big spenders lose kiva Nov 2015 #16

Never ryan_cats Nov 2015 #3

+1 Go Vols Nov 2015 #9

That is great advice but once Glass-Steagall was repealed jwirr Nov 2015 #13

That's how it works, and he knew the rules when he started to gamble . . . hatrack Nov 2015 #4

Looking good, Billy Ray? Warren DeMontague Nov 2015 #5

Margin called! longship Nov 2015 #6

You know, I was going to go back in time and kill baby Hitler Warren DeMontague Nov 2015 #7

I have no sympathy. Snobblevitch Nov 2015 #10

If GummyBearz Nov 2015 #30

Two words. 'Put option' Travis_0004 Nov 2015 #11

Sounds like he's a day trader though. woolldog Nov 2015 #26

He might actually have to get a real job now. smirkymonkey Nov 2015 #35

I like his honesty. I was going to give but he only asked for 5 grand and he has 5,130 already yeoman6987 Nov 2015 #12

The fact that he's already received over $5k EL34x4 Nov 2015 #24

+1 Egnever Nov 2015 #39

Why the hell would he not use a put option? Recursion Nov 2015 #14

It's gotta be satire Cal Carpenter Nov 2015 #15

He was playing Russian roulette and lost. lpbk2713 Nov 2015 #17

I feel some of his pain but would not give him anything. He'll lose a lot of his life and... BlueJazz Nov 2015 #18

I'm sympathetic philosslayer Nov 2015 #19

Yeah Dorian Gray Nov 2015 #23

Too small to fail? MowCowWhoHow III Nov 2015 #21

Too bad, so sad.... Adrahil Nov 2015 #22

*this* is why *everyone* benefits from a government safety net unblock Nov 2015 #27

What's his job again? BeyondGeography Nov 2015 #28

"Martin Shkreli (yes, THAT Shkreli) gained control of a majority of the shares." KamaAina Nov 2015 #31

All he has to do is shoot some Blue_Tires Nov 2015 #32

Sorry. Im fresh out of fucks to give. bunnies Nov 2015 #33

As robber baron Jay Gould supposedly said gratuitous Nov 2015 #36

I'm evil geomon666 Nov 2015 #40

Show some compassion. If the GoFundMe were open, ericson00 Nov 2015 #38

No, he's not an entrepreneur. No pity, here. Let him open a small lindysalsagal Nov 2015 #41