Is $TSLA going to 600.00?

[Ogre]

You still have no clue, do you?

You are funny.

 

[Eye of Elon]

i think i finally comprehend short selling. Say TSLA is $1000, i loan that share to Mr Short for $1 a month. Mr Short immediately sells that share for 1000, then he waits. If TSLA drops to 600 one month later he buys a share, gives it to me and makes a $399 profit.

Is this correct?

 

[John K]

i think i finally comprehend short selling. Say TSLA is $1000, i loan that share to Mr Short for $1 a month. Mr Short immediately sells that share for 1000, then he waits. If TSLA drops to 600 one month later he buys a share, gives it to me and makes a $399 profit.

Is this correct?

Yes. Also, if the price rises to 1,300, Mr. Short loses $301.

Either direction, you made realized gain of $1

 

[TruckElectric]

i think i finally comprehend short selling. Say TSLA is $1000, i loan that share to Mr Short for $1 a month. Mr Short immediately sells that share for 1000, then he waits. If TSLA drops to 600 one month later he buys a share, gives it to me and makes a $399 profit.

Is this correct?

Short selling. You want to short Tesla: You have to have a margin account with xxx amount. Now you want to short 100 TSLA shares and your broker lends you 100 TSLA shares at 1200.00/share.

Since you borrowed TSLA shares from the broker it's not yours to buy/sell. Let's say TSLA goes to $800.00 and you want to cash in. You return the shares to the broker and he owes you $40,000.00

If TSLA goes to 1400.00 and you are ready to throw in the towel you return the shares to the broker and you owe $20,000.00

If you only have $15,000.00 in your margin account you will get a margin call.

 

[John K]

Short selling. You want to short Tesla: You have to have a margin account with xxx amount. Now you want to short 100 TSLA shares and your broker lends you 100 TSLA shares at 1200.00/share.

Since you borrowed TSLA shares from the broker it's not yours to buy/sell. Let's say TSLA goes to $800.00 and you want to cash in. You return the shares to the broker and he owes you $40,000.00

If TSLA goes to 1400.00 and you are ready to throw in the towel you return the shares to the broker and you owe $20,000.00

If you only have $15,000.00 in your margin account you will get a margin call.

No, the broker does not gamble on your short position. You take full risk. Broker makes money regardless if you make or lose money by the fees and interest.

 

[TruckElectric]

No, the broker does not gamble on your short position.

That is why you are REQUIRED to have a margin account. The margin account is there to protect the broker.

Broker makes money regardless if you make or lose money by the fees and interest.

True enough. But most people really suck at short selling so it's kinda like the casino, the house wins usually.

 

[John K]

That is why you are REQUIRED to have a margin account. The margin account is there to protect the broker.



True enough. But most people really suck at short selling so it's kinda like the casino, the house wins usually.

If Mr. Short borrows stock at 1,000 and stock drops to $500 when returned, the broker does not give Mr. Short $500. Broker transfers $1,000 to your account after your sell the borrowed stock.

Broker does not want cash at the end, they want that share back. Thus, to close you need to buy back equivalent shares and return shares back plus pay associated fees.

A required cover is triggered if the stock does not go your way and the value of your portfolio drops below a 1.x multiplied value of your portfolio. A daily cover may be needed if the position does not go the way Mr Short wants on a daily basis.

What does not happen is the broker takes even to your odds and pays out of their pocket if it goes Mr Short’s way. The broker also does not receive any additional money if the stock rose to $2,000.

Ask yourself, where does the $500 come from if the stock dropped and where does the $1,000 go to if the stock rose $1,000. The amounts do not originate from the broker or line the broker’s pockets.

 

[TruckElectric]

If Mr. Short borrows stock at 1,000 and stock drops to $500 when returned, the broker does not give Mr. Short $500.

Correct. Mr. Short owes the broker $500.00

Sorry about that.

Broker transfers $1,000 to your account after your sell the borrowed stock.

No. The broker gets his $500.00 share back plus $500.00 from Mr. Short.

Broker does not want cash at the end, they want that share back.

That is the agreement. You return the shares you borrowed.

Thus, to close you need to buy back equivalent shares and return shares back plus pay associated fees.

The only thing you got right is fees.

A required cover is triggered if the stock does not go your way and the value of your portfolio drops below a 1.x multiplied value of your portfolio. A daily cover may be needed if the position does not go the way Mr Short wants on a daily basis.

That is what the margin account is for.

What does not happen is the broker takes even to your odds and pays out of their pocket if it goes Mr Short’s way. The broker also does not receive any additional money if the stock rose to $2,000.

Ask yourself, where does the $500 come from if the stock dropped and where does the $1,000 go to if the stock rose $1,000. The amounts do not originate from the broker or line the broker’s pockets.

Not sure about that.

Give me some time to look up the agreement on one of my brokers accounts.
I'll use IB.
.

 

[Ogre]

i think i finally comprehend short selling. Say TSLA is $1000, i loan that share to Mr Short for $1 a month. Mr Short immediately sells that share for 1000, then he waits. If TSLA drops to 600 one month later he buys a share, gives it to me and makes a $399 profit.

Is this correct?

Yes… exactly except you don’t get paid. Brokerages do all of this behind the scenes.

In fact you never interact with Mr Short at all, the brokerage does it all without you knowing.

 

[Ogre]

Correct. Mr. Short owes the broker $500.00

Sorry about that.



No. The broker gets his $500.00 share back plus $500.00 from Mr. Short.



That is the agreement. You return the shares you borrowed.



The only thing you got right is fees.



That is what the margin account is for.



Not sure about that.

Give me some time to look up the agreement on one of my brokers accounts.
I'll use IB.
.

He understands this better than you.

 

[TruckElectric]

Correct. Mr. Short owes the broker $500.00

Sorry about that.



No. The broker gets his $500.00 share back plus $500.00 from Mr. Short.



That is the agreement. You return the shares you borrowed.



The only thing you got right is fees.



That is what the margin account is for.



Not sure about that.

Give me some time to look up the agreement on one of my brokers accounts.
I'll use IB.
.

May take a bit.....LOL

 

[TruckElectric]

If Mr. Short borrows stock at 1,000 and stock drops to $500 when returned, the broker does not give Mr. Short $500. Broker transfers $1,000 to your account after your sell the borrowed stock.

Broker does not want cash at the end, they want that share back. Thus, to close you need to buy back equivalent shares and return shares back plus pay associated fees.

A required cover is triggered if the stock does not go your way and the value of your portfolio drops below a 1.x multiplied value of your portfolio. A daily cover may be needed if the position does not go the way Mr Short wants on a daily basis.

What does not happen is the broker takes even to your odds and pays out of their pocket if it goes Mr Short’s way. The broker also does not receive any additional money if the stock rose to $2,000.

Ask yourself, where does the $500 come from if the stock dropped and where does the $1,000 go to if the stock rose $1,000. The amounts do not originate from the broker or line the broker’s pockets.

Just curious. What broker do you use?

 

[TruckElectric]

If Mr. Short borrows stock at 1,000 and stock drops to $500 when returned, the broker does not give Mr. Short $500. Broker transfers $1,000 to your account after your sell the borrowed stock.

Broker does not want cash at the end, they want that share back. Thus, to close you need to buy back equivalent shares and return shares back plus pay associated fees.

A required cover is triggered if the stock does not go your way and the value of your portfolio drops below a 1.x multiplied value of your portfolio. A daily cover may be needed if the position does not go the way Mr Short wants on a daily basis.

What does not happen is the broker takes even to your odds and pays out of their pocket if it goes Mr Short’s way. The broker also does not receive any additional money if the stock rose to $2,000.

Ask yourself, where does the $500 come from if the stock dropped and where does the $1,000 go to if the stock rose $1,000. The amounts do not originate from the broker or line the broker’s pockets.

Ok. Upon some reviewing on the process of short selling I was off. You borrow the shares, sell them at a high price and buy back at a lower price, hopefully, and the return the shares at a given time period and pocket the difference of prices. The broker is not responsible any gains or loses. You are as the trader. There is requirements by the broker for how much money is required before you can short sell stocks.

It's only been a few years since I have even thought about short trading stocks.

Options are better.

 

[John K]

 

[John K]

Just curious. What broker do you use?

Ameritrade meets my needs.

I don’t short. I do squeeze my position when I think appropriate. Occasional margin but do not like the increased risk.