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I don't understand shorting, how is this legal?
- Thread starter Tanquen
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Most of the ‘risks’ depends on whether you are buying or selling options. But all this is for another place.
Google will teach all you need to know about options but anyone not experienced should stay far away is my comment.you can enter into far more complex positions than just buying or selling, like you say this is not school for options trading.Most of the ‘risks’ depends on whether you are buying or selling options. But all this is for another place.
The OP's question is very legitimate, I think.
Say you're a 17th century boat owner and you want to do a trip from Antwerp to Indonesia, but you haven't the money to finance it yourself. You would do what is now called an IPO (also begging for 'limited liability' for your company, in case the vessel crashes somewhere). Return would be 50% or so for each shareholder, but obviously only if the ship makes it back to Antwerp with its precious cargo.
You need a 'market' to sell your idea. Hence the "Exchange".
Say you're the British government anno 1815 and you want to continue waging war with France. You emit government bonds @ 4% return, repayable after ten years. There needs to be a 'market' on which to sell those things. Hence, again, the "Exchange".
If there is such a market, some subscribers may want to sell such bonds before the end of the ten-year period, or may want to sell their share in the expedition to Indonesia before the vessel is back in Europe, for whatever reasons. Makes sense that there is then a market for that also. No problem, all of that helps trade and government, in the end, and can easily be done on the "Exchange". A rise in share price will help the shipowner get even more money, for less dividends, on his next trip; a rise in the price of government bonds will allow the government to issue new bonds at a lower interest level. And, importantly, vice-versa of course! All of this is good for both the market and for the companies or governments needing such capital.
Does holding short or long positions, or trading in options, help companies or governments? Of course not. That's pure gambling which could lead to either bubbles or crashes, unrelated to the real economy of the underlying companies/governments, but perfectly capable of creating a crisis. Buying/selling is for a large part also computer-driven today (and those computers can react in a split second to what other computers "decide" in a split second), which accentuates the dangers of bubbles and crashes.
Should we forbid such gambling (e.g. by requiring that anyone must hold on to his shares for 30 days, 30 minutes, or even 30 seconds)? We probably should, as probably even 30 seconds would help.
Can we? Of course not. Any market inventing such rules would become obsolete tomorrow, and replaced by a more 'free' market in another country.
We now live in a 100% global financial world, with a 100% impossibility to have global laws on issues such as this 'gambling'. The result is, and will stay, anarchy, except if we mandate supra-national bodies such as the U.N. to do something about it, and allow it to enforce its decisions.
Won't happen tomorrow, I fear.
Just my 2p.
Say you're a 17th century boat owner and you want to do a trip from Antwerp to Indonesia, but you haven't the money to finance it yourself. You would do what is now called an IPO (also begging for 'limited liability' for your company, in case the vessel crashes somewhere). Return would be 50% or so for each shareholder, but obviously only if the ship makes it back to Antwerp with its precious cargo.
You need a 'market' to sell your idea. Hence the "Exchange".
Say you're the British government anno 1815 and you want to continue waging war with France. You emit government bonds @ 4% return, repayable after ten years. There needs to be a 'market' on which to sell those things. Hence, again, the "Exchange".
If there is such a market, some subscribers may want to sell such bonds before the end of the ten-year period, or may want to sell their share in the expedition to Indonesia before the vessel is back in Europe, for whatever reasons. Makes sense that there is then a market for that also. No problem, all of that helps trade and government, in the end, and can easily be done on the "Exchange". A rise in share price will help the shipowner get even more money, for less dividends, on his next trip; a rise in the price of government bonds will allow the government to issue new bonds at a lower interest level. And, importantly, vice-versa of course! All of this is good for both the market and for the companies or governments needing such capital.
Does holding short or long positions, or trading in options, help companies or governments? Of course not. That's pure gambling which could lead to either bubbles or crashes, unrelated to the real economy of the underlying companies/governments, but perfectly capable of creating a crisis. Buying/selling is for a large part also computer-driven today (and those computers can react in a split second to what other computers "decide" in a split second), which accentuates the dangers of bubbles and crashes.
Should we forbid such gambling (e.g. by requiring that anyone must hold on to his shares for 30 days, 30 minutes, or even 30 seconds)? We probably should, as probably even 30 seconds would help.
Can we? Of course not. Any market inventing such rules would become obsolete tomorrow, and replaced by a more 'free' market in another country.
We now live in a 100% global financial world, with a 100% impossibility to have global laws on issues such as this 'gambling'. The result is, and will stay, anarchy, except if we mandate supra-national bodies such as the U.N. to do something about it, and allow it to enforce its decisions.
Won't happen tomorrow, I fear.
Just my 2p.
HankLloydRight
No Roads
It is not. The original quote was "to actively lobby for their failure so you can make a profit seems a little out there."
The two methods (long/short) are identical but inverse actions, take your pick:
"for example if I buy(short) a stock, make comments pumping up(down) it's value and then selling out(covering) it is one thing."
I made no comments about being the creator of a stock, or making false claims, fake orders, etc. There are pump and dump scams going on all the time from people out to make a buck and unrelated to the actual company/stock.
Making Pump or Dump comments is one thing. An intelligent investor can always do and should always do his due dligence. If you are naive and get caught up in FUD, that is the problem for the naive investor.
But the actions for shorters go far beyond that. They actively work in so many inderect ways for the failure of the company. This UAW nuisance, dealer opposition, spurious law suits, spurious NHTSA filings and other shenanigans - I believe - are actively funded or aided and abetted by shorts. If that happens then that is where I believe they are crossing the line.
What would it take for them to fund a sabotage to the production line with one or two active moles inside the factory, or worse do bodily injury to Elon. Billions of dollars are at stake for shorts to lose or gain. These are not above the realm of imagination
On the other hand, the only nefarious activity Longs can do is write fake positive hyped up news -which any investor with half a brain can easily see through.
But the actions for shorters go far beyond that. They actively work in so many inderect ways for the failure of the company. This UAW nuisance, dealer opposition, spurious law suits, spurious NHTSA filings and other shenanigans - I believe - are actively funded or aided and abetted by shorts. If that happens then that is where I believe they are crossing the line.
What would it take for them to fund a sabotage to the production line with one or two active moles inside the factory, or worse do bodily injury to Elon. Billions of dollars are at stake for shorts to lose or gain. These are not above the realm of imagination
On the other hand, the only nefarious activity Longs can do is write fake positive hyped up news -which any investor with half a brain can easily see through.
HankLloydRight
No Roads
How so?
Pump and dump - Wikipedia
Is this not exactly what shorts do?
P.S. I have an MBA from Wharton.
HankLloydRight
No Roads
HankLloydRight
No Roads
And you're conflating my original reply to another comment into something much bigger. The original comment was:
to which I responded:
That's it.
Shorting is a valuable market mechanism. It allows for more fair sell-side pressure on issues which can aid in creating a better valuation. Whether people use "negative" comments more if they're shorts than "positive" comments for longs is really beside the point.
Short selling is also no closer to gambling than short term long trading, when used appropriately.
Short selling is also no closer to gambling than short term long trading, when used appropriately.
in wall st parlance that is known as talking your position. everyone does it. the difference between someone talking their position and a pump and dump operation is huge and isn't the issue.
sadly IMHO the whole stock market has become more casino like than a place for investments.
The stock market has been a place for gambling since its inception. It really operates as both. For those who invest on sound principles and do something like dollar cost averaging, it continues to be a valuable place to keep money. For those who trade short term, it’s more of a game, and that game has been squeezed mostly out due to faster and smarter algorithms that are happy to take your money.
HankLloydRight
No Roads
Uh, yeah...
You're accusing me of conflating "individual investor blabbing about their position" (pump and dump) and "a professional scam operation" (short sellers). You are asserting that "pump and dump" scams are only operated by individuals who can't come close to the "professional" level of short sellers.
HankLloydRight
No Roads
Lastly, if you want to have an intelligent, adult conversation about this, I'd suggest not being so confrontational and condesending. I'm done here.
if you want to have in intelligent, adult conversation it helps if you have a basic or rudimentary understanding of the subject matter. I am sorry if you cannot grasp what I've offered, maybe cnbc, marketwatch and the like would be a better source of info
Gambling on stocks and commodities really took off when the Internet became the tool of choice.
It can actually make financial sense to spend $100,000 on articles and links to alter stock pricing. Why do I know this? Hundreds if not thousands of companies are doing it and the number is increasing.
In order for gambling to work better, you need a way to make money in both directions, hence options.
If you wanted to reduce the gambling, here's what you would do:
1) Stocks purchases require a background check delay to stop insider trading. 30 days then adjust accordingly.
2) Stock transfers are subject to sales tax.
3) Commodity buyers must take physical delivery before transferring ownership.
Let's see Warren Buffett come out for that plan if he truly believes the rich aren't taxed enough, and he believes in no insider trading and hype to drive prices.
It can actually make financial sense to spend $100,000 on articles and links to alter stock pricing. Why do I know this? Hundreds if not thousands of companies are doing it and the number is increasing.
In order for gambling to work better, you need a way to make money in both directions, hence options.
If you wanted to reduce the gambling, here's what you would do:
1) Stocks purchases require a background check delay to stop insider trading. 30 days then adjust accordingly.
2) Stock transfers are subject to sales tax.
3) Commodity buyers must take physical delivery before transferring ownership.
Let's see Warren Buffett come out for that plan if he truly believes the rich aren't taxed enough, and he believes in no insider trading and hype to drive prices.
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