mfw i learning what a hedgefund and shorting is after 4 coffee at 6am
(media.patriots.win)
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It's easy, fren.
Short: They borrow a stock to sell. It's like you borrow a car from your fren and:
Ideal scenario for you is when price go to 0.
Bad when price goes up.
Holy shit thank you. I saw a couple other explanations but I'm retarded and it meant nothing to me. But I think I get it now. Frens helping frens, thanks man.
Lol
The bad in price goes up - you can lose everything you invested and more, because you HAVE to buy stock shares back by the date agreed.
Reason? Stock prices can only go down to zero, but they CAN go up as far as the market says it can.
Shorting says you can make a 100% profit (selling at $x price, buying back for free), or you can get completely wiped out (selling at $x price, but forced to buy back at 100 times $x price).
These hedge funds literally got caught with their shorts down....
Shorting is very, very profitable if you use them to ride the downs of your stocks to the next up cycle.
Shorting can wipe you out if your stock is fairly stagnant, or if unexpected demand comes into play...
Basically, under the current state of matters - hedge fund invested 4.6b, probably expecting to +50% their money by crashing the market.
Instead, they're gonna have to buy in at 27b, assuming they have to buy in at $240/share (itll be higher, likely).
The losses are limitless, should they have to buy in at, say, $550 a share, they'd be $64b deep on their $5b investment
Yes.
Cannot upvote your comment enough.
The big boy club is trying all it can to stave off such a huge loss by trade manipulation.
However, if they cannot operate without such massive intervention a private investor would never see...it's all about control. They shouldn't even be in the game.
I lost 100k and my trading account due to this kind of hedge fund shenanigans that force the market in their preferred direction.
Let them burn and learn...
Best ELI5 I've seen so far. Thank you!
I still don't understand it. Wouldn't it be more like borrowing a fren's car then driving 150,000 miles on it and trashing when you return the car? If I'm understanding what you're saying, is you're borrowing something worth X, selling it, then buying it back at a cheaper price and giving it back but not worth less than X?
OK, le's have a more close to a real world example. AMZN market price is $3000
Ok, I think I'm starting to understand it. So from the stock owner's perspective, who is playing the long game or using the interest, you loan HF 1000 shares of AMZN, HF sells shares, AMZN price goes down, HF buys 1000 shares and returns it to the stock owner. So the stock owner is no better or worse off because even if he didn't loan out the shares, he still would have lost value due to price drop. Am I getting that? Also, appreciate the explanation for this stonk illiterate pede.
Yes. For the stock owner it doesn't matter.
The stock owner doesn't even know he lends shares except broker pays him a commission that comes from the short seller, after some broker cut, of course. It's usually tied to the one of the FED interbank overnight rates. But this commission actually can be very high is the stock is heavily shorted and is in demand.
So if the commission is high, the short seller accumulates losses via commission accruals even if the stock doesn't move down as he expects.
Yeah, it's a complicated mess :)
Thank you fren! I’m trying to figure out now how to buy some Silver... not really having much luck with these sites.
You may consider ETFs:
You basically buy shares backed by the metal they store in vaults. And hope they do accounting properly :)
It's not as holding real metal at home. But something.