I assume this is related to stocks and investing, but what does it mean short a stock? Like I’ve seen people asking if it’s time to short Netflix.
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Cutting out all the details, when you short a stock, this is essentially what happens:
1) Today, you sell stock you don’t have, at today’s price.
2) Later, you have to buy that same amount of shares, so you have something to transfer to the person who bought from you.
3) If the price went down in the meantime, hooray, you just made a profit.
4) If the price went up, boo, you just lost money.
Cutting out all the details, when you short a stock, this is essentially what happens:
1) Today, you sell stock you don’t have, at today’s price.
2) Later, you have to buy that same amount of shares, so you have something to transfer to the person who bought from you.
3) If the price went down in the meantime, hooray, you just made a profit.
4) If the price went up, boo, you just lost money.
Johnny has some apples. He agrees to let you borrow the apple for a month for a small fee, because Johnny thinks the price is going up, and he likes extra money. You take the apple an sell it right away for 3 dollars. because you think nobody’s buying fucking apples next week. These apples got worms. Next week rolls around and the price of apples is cheaper. Another week, the apple price plummets even cheaper. So you buy the apple back from the sucker who bought it from you – because he’s like “holy fuck I’ll take anything I can get for these apples, they’re worthless.” So he panic sells his apples back to you at a loss, you make the difference in prices, and then you bring the apples back to Johnny. Johnny doesn’t give a fuck he’s gonna hold his bag of apples for years until he eventually concedes, at which point the price will sky rocket and Johnny will by back in, a sad cycle that will eventually BK him.
Guess wrong ? the apple got more expensive? well you have to pick up the tab, and best believe Johnny wants his apple back. Don’t make Johnny come over there.
This is one way to short.
Johnny has some apples. He agrees to let you borrow the apple for a month for a small fee, because Johnny thinks the price is going up, and he likes extra money. You take the apple an sell it right away for 3 dollars. because you think nobody’s buying fucking apples next week. These apples got worms. Next week rolls around and the price of apples is cheaper. Another week, the apple price plummets even cheaper. So you buy the apple back from the sucker who bought it from you – because he’s like “holy fuck I’ll take anything I can get for these apples, they’re worthless.” So he panic sells his apples back to you at a loss, you make the difference in prices, and then you bring the apples back to Johnny. Johnny doesn’t give a fuck he’s gonna hold his bag of apples for years until he eventually concedes, at which point the price will sky rocket and Johnny will by back in, a sad cycle that will eventually BK him.
Guess wrong ? the apple got more expensive? well you have to pick up the tab, and best believe Johnny wants his apple back. Don’t make Johnny come over there.
This is one way to short.
Johnny has some apples. He agrees to let you borrow the apple for a month for a small fee, because Johnny thinks the price is going up, and he likes extra money. You take the apple an sell it right away for 3 dollars. because you think nobody’s buying fucking apples next week. These apples got worms. Next week rolls around and the price of apples is cheaper. Another week, the apple price plummets even cheaper. So you buy the apple back from the sucker who bought it from you – because he’s like “holy fuck I’ll take anything I can get for these apples, they’re worthless.” So he panic sells his apples back to you at a loss, you make the difference in prices, and then you bring the apples back to Johnny. Johnny doesn’t give a fuck he’s gonna hold his bag of apples for years until he eventually concedes, at which point the price will sky rocket and Johnny will by back in, a sad cycle that will eventually BK him.
Guess wrong ? the apple got more expensive? well you have to pick up the tab, and best believe Johnny wants his apple back. Don’t make Johnny come over there.
This is one way to short.
To “short” a stock means to bet that the stock price will go down. This is done by borrowing shares of the stock from a broker and then selling them in the market. If the stock price falls, the investor can buy back the shares at a lower price, return them to the broker, and make a profit. If the stock price rises, the investor will have to buy back the shares at a higher price, resulting in a loss. In the example you mentioned, someone might be asking if it’s a good time to “short” Netflix stock, meaning that they think the stock price will go down and they will make a profit.
One way on to make money on the stock market is to buy stock when it is cheap wait until it gets more expensive and then sell it.
If you believe the value of a stock will rise you buy it now and sell it later when it is hopefully worth more.
Similarly if you own stock and believe it is going to lose value you can sell it when it is worth a lot. once it has lost value you can always buy the stock back for fraction of what you sold it for and you end up with the same stock you had before and some extra money.
Those two options are simple enough, right?
If you think the stock is going up buy now sell later. If you think the stock is going down and you already own some, sell now and buy back later. In both cases you end up owning with what you started with plus some extra money.
But what if you think the stock is going down and you don’t own any stock to sell now?.
How can you make money betting on a stock that you don’t own going down?
That is where short selling comes in.
You basically go to someone who owns stock that you think is going to go down and ask them to borrow it from them.
You sell the stock that you borrowed and wait. Later when the stock has gone down in price you buy some back and give that back to the person you borrowed it from.
This is short selling.
You essentially bet money on the price of stock going down over time.
The obvious problem is that if you bet wrong, you have to buy the stock back at more than you sold it for to give back what you borrowed.
Another issue is that people won’t let you borrow their stock to gamble with for free. They could always make money by doing what you are doing themselves. So they ask for money to be allowed to borrow stocks to gamble with and you hope that you make more profit than you paid in borrowing fees.
To “short” a stock means to bet that the stock price will go down. This is done by borrowing shares of the stock from a broker and then selling them in the market. If the stock price falls, the investor can buy back the shares at a lower price, return them to the broker, and make a profit. If the stock price rises, the investor will have to buy back the shares at a higher price, resulting in a loss. In the example you mentioned, someone might be asking if it’s a good time to “short” Netflix stock, meaning that they think the stock price will go down and they will make a profit.
To “short” a stock means to bet that the stock price will go down. This is done by borrowing shares of the stock from a broker and then selling them in the market. If the stock price falls, the investor can buy back the shares at a lower price, return them to the broker, and make a profit. If the stock price rises, the investor will have to buy back the shares at a higher price, resulting in a loss. In the example you mentioned, someone might be asking if it’s a good time to “short” Netflix stock, meaning that they think the stock price will go down and they will make a profit.
One way on to make money on the stock market is to buy stock when it is cheap wait until it gets more expensive and then sell it.
If you believe the value of a stock will rise you buy it now and sell it later when it is hopefully worth more.
Similarly if you own stock and believe it is going to lose value you can sell it when it is worth a lot. once it has lost value you can always buy the stock back for fraction of what you sold it for and you end up with the same stock you had before and some extra money.
Those two options are simple enough, right?
If you think the stock is going up buy now sell later. If you think the stock is going down and you already own some, sell now and buy back later. In both cases you end up owning with what you started with plus some extra money.
But what if you think the stock is going down and you don’t own any stock to sell now?.
How can you make money betting on a stock that you don’t own going down?
That is where short selling comes in.
You basically go to someone who owns stock that you think is going to go down and ask them to borrow it from them.
You sell the stock that you borrowed and wait. Later when the stock has gone down in price you buy some back and give that back to the person you borrowed it from.
This is short selling.
You essentially bet money on the price of stock going down over time.
The obvious problem is that if you bet wrong, you have to buy the stock back at more than you sold it for to give back what you borrowed.
Another issue is that people won’t let you borrow their stock to gamble with for free. They could always make money by doing what you are doing themselves. So they ask for money to be allowed to borrow stocks to gamble with and you hope that you make more profit than you paid in borrowing fees.
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