They have to be bought - as in you have to pay for them, doing otherwise would be fraud.
Source: investor.gov
Short selling is just acting as a middleman between somebody who has shares they want to sell and someone else who wants to buy them.
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Short selling and other similar stock market things
- Thread starter Bletchleyite
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Short selling is just acting as a middleman between somebody who has shares they want to sell and someone else who wants to buy them.
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Tetchytyke
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That's what I said. You borrow a share, temporarily sell it and buy it back for less, pocketing the difference before returning it to its owner. You don't trade it in the conventional sense.
Owning a share in company A, selling it high, then buying it again when the price drops, isn't shorting.
Bletchleyite
Veteran Member
Conventionally, one needs to buy something before one can sell it.
Can I borrow your house so I can sell it? No, didn't think so.
Bletchleyite
Veteran Member
In order to make money from misfortune.
Sorry, I won't be convinced on this - the markets would be better without it. Stocks should be about investing in a company to promote its growth, either so the shares increase in value then you sell them, or for dividends along the way. Betting on companies failing is like betting on the next terrorist attack - it's despicable.
Bletchleyite
Veteran Member
Correct.
Also correct. That is conventional investment - you buy it low because you believe the company will grow or otherwise improve and it'll be worth more. That's positive investment. You could lose if you get it wrong, but that's fine as long as you're happy with it. It's a positive thing - you buy the share to put money into the company so it can use that money to grow and improve.
Not necessarily from misfortune. While short selling gets a bad name from high-profile cases of shorting and the collapse of a company being contemporaneous*, the truth is that (a) it is very rarely (never?) the cause of the collapse; and (b) most short selling occurs when investors are able to see that a stock is overvalued and they make money of small falls in share prices.
*Correlation does not imply causation
Not even a remotely close analogy.
There is no requirement that the original and final owner are the same entity. Most short selling consists of agreeing a sale at $X on a future date and then buying at $Y (where Y is less than X) before the future date (on the basis that something will cause the share price to drop).
In the case of day trading, substitute 'date' with 'time'.
Nonsense. When you short sell, it's entirely possible that the person you end up buying from to make good on the stock loan hasn't even decided at that point that they want to sell. Short selling doesn't even slightly facilitate anything in the way you're trying to suggest here.
DarloRich
Veteran Member
Dress it up how you like. This is just gambling. It is the same as betting on the 3:15 at Towcester
The biggest difference is the bwankers havent the balls to gamble thier own money and instead use yours
At the start of the process the shares are owned by Person A and at the end they are owned by Person B.
Or are you suggesting that no shares change hands?
There are huge numbers of individual traders involved in day trading. It's not nearly as common here as in other markets but in the USA there are well over 50 million independent investment accounts registered.
Most will be buying to hold long term but many will be actively trading which will include taking both short and long positions.
DarloRich
Veteran Member
It is just gambling dressed up as science especially day trading. Nothing more.
Unless you are buying shares that are being issued, buying shares in the stock exchange provides no additional funds to a company.
Each year, I bet that my house will burn down, that I'll cause an awful car accident, and that I will be seriously injured on holiday and need to be repatriated in a private jet air ambulance. These are dressed up as insurance policies, but its just gambling.
Its good to have a marketplace where people can balance risk and return.
Of course I'm not - nothing I wrote implies that. Your first sentence, however, refutes nothing I wrote in my post - neither the part you quoted, or the part you omitted. Are you suggesting that without the short seller, person A would not have been able to sell the shares, and person B would not have been able to buy the shares? If you are, you know absolutely nothing about how stock markets operate. I repeat: short sellers facilitate nothing that could not happen without their short selling happening. Do you deny that?
Nope. But the same can be said of any middleman. By definition.
DarloRich
Veteran Member
This is a very silly post. Insurance is actually hedging your bet. Any fule knos that
edwin_m
Veteran Member
And in recent years providers motivated by commission have been flogging us more and more insurance for all kinds of eventualities, some of which would never be claimable, so unlikely as not to be worth worrying about, or with such small consequences that it would be better to put the money aside to pay for any eventualities if they actually arose. The most obvious example, PPI, then gave rise to claims management companies that were flogging us the opportunity to claim compensation motivated by them keeping a big slice of it. Now the PPI farrago is coming to a close, these companies seem to be moving on to the mis-selling of other financial opportunities.
I suspect anything more than a straightforward insurance policy is beyond the understanding of a non-specialist. The 2008 crisis highlighted that even those claiming to be specialists didn't understand what they had got themselves into.
I suspect anything more than a straightforward insurance policy is beyond the understanding of a non-specialist. The 2008 crisis highlighted that even those claiming to be specialists didn't understand what they had got themselves into.
Just a few points
A good market requires liquidity and volume. All the speculators provide that - if things don’t get traded enough then the price becomes stale and the stock becomes illiquid. The speculators make the market better for the long term investors as they then know they can offload at a time of their choosing and know they can see an up to date value.
The futures and derivatives markets have given us lots of nice stuff like fixed rate mortgages and steadier prices in the shops.
The lending of stock for the short sellers to play with brings in a nice income stream for the longer term holders of those stocks.
A good market requires liquidity and volume. All the speculators provide that - if things don’t get traded enough then the price becomes stale and the stock becomes illiquid. The speculators make the market better for the long term investors as they then know they can offload at a time of their choosing and know they can see an up to date value.
The futures and derivatives markets have given us lots of nice stuff like fixed rate mortgages and steadier prices in the shops.
The lending of stock for the short sellers to play with brings in a nice income stream for the longer term holders of those stocks.
The beneficial owners don't see any of that nice income stream though do they? Just the nominee.
That doesn’t sound very legal!! The pension and life funds I worked with received the income from stock lending of their portfolios.
Surely your not going to lend to a short seller without a fee?
If you're the beneficial owner of shares held in a nominee company, it's likely that you'll have no idea that they're being loaned. I think it's possible that nobody will know who the beneficial owner of the particular shares being loaned are - if the nominee holds 10,000 shares for 20 beneficial owners and loans 5,000 of them, will it be noted which beneficial owners' shares in particular are being loaned?
Tetchytyke
Veteran Member
And if that fee is less than the difference in share value after the shorting, you'd have to question their financial prudence. If you were hedging you'd keep some and sell some, not lend the shares to someone whose sole objective is to devalue your asset.
i am still not convinced what you are suggesting would be legal.
That assumes the people shorting are guessing right. Also the lending party are probably investing on a longer term plan, and possibly more interested in dividends.
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