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- Nov 19, 2001
Oh dear... okay...
Selling short is selling shares you don't have. Here's a general example:
*log on to e-trade*
*thinks that GM is going to go DOWN*
*sells short 100 shares*
*receives $524 for selling 100 shares at $5.24* (minus trade commission of 12.99)
($511.01)
Well, now later down the road you're going to have to do what's called "buy to cover" meaning, buy those shares to cover your sale. So youbetter hope it drops lower than $5.24 so that you can keep the difference. Selling short means you can lose an UNLIMITED amount of money (hypothetically).Buying long means you can only lose what you put into the security (along with the 12.99 respectively)
Sorry if I wasn't clear... I can go again on another example if you'd like.
Selling short is selling shares you don't have. Here's a general example:
*log on to e-trade*
*thinks that GM is going to go DOWN*
*sells short 100 shares*
*receives $524 for selling 100 shares at $5.24* (minus trade commission of 12.99)
($511.01)
Well, now later down the road you're going to have to do what's called "buy to cover" meaning, buy those shares to cover your sale. So youbetter hope it drops lower than $5.24 so that you can keep the difference. Selling short means you can lose an UNLIMITED amount of money (hypothetically).Buying long means you can only lose what you put into the security (along with the 12.99 respectively)
Sorry if I wasn't clear... I can go again on another example if you'd like.