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Here's some additional thoughts on Shorting....

Posted by: Flash on Oct 25, 17:26 in response to kruger's post addition on last reply

Personally, don't think of it as "selling" short. Here's the way shorts work:

If you think the price of a stock is high, and it will DROP in time, then you can 'short' the stock. Here's an example:

"MOVIE" stock is priced at $100 and it is opening on Friday. You don't think it will have a very good opening weekend, so you 'buy' (or short) 50,000 shares.

On Sunday, you log into HSX and find out that indeed, "MOVIE" did not open well, and HSX adjusted the price to $75... earning you $25 a share for every share you owned... PROFIT!!!

Basically, if you think a stock is NOT worth what it's priced at, you can "short" it, if you think the price will go down soon... if the price DOES drop, you earn $$. When you want to "sell" your short... you "cover" it in the trade box.

Shorting a stock just means you think the price will drop... if it does, you earn $$... if the price goes UP on a stock you buy short... you LOSE money.

So, "shorting" is the same as "buying" a stock (if you look at it that way) but you are betting the price is going to go DOWN... NOT up... it's the opposite of BUYING a stock "long."

When you buy a stock "long" you are hoping the price goes UP, if the price DROPS you LOSE money... shorting is just the opposite. When you want to 'sell' a stock you own LONG... you "sell" it. When you want to 'sell' a stock you own SHORT.. you 'cover' it.

Maybe I confused you more with such a long explanation, but I hope that helps.