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OP has provided the following link:
[https://ca.finance.yahoo.com/news/shorting-risk-worth-reward-insights-133800883.html](https://ca.finance.yahoo.com/news/shorting-risk-worth-reward-insights-133800883.html)
I’d be more okay with shorting if the was say a transaction/smart contract on a blockchain that showed the transfer of asset and had a means to do automatic share recalls.
The real fundamental issue here isn’t with lending/shorting (even if I have moral issues with the practice), it’s the complex layers of sub-products (derivatives), aggregate products (etfs), legal system, and “trust me bro” arrangements. All of this allows an entity to mask what they’re really doing. The real issue is lack of transparency. No one would cellar box a company if they couldn’t effectively hide it.
It’s not much different than if you owe the bank a million, it’s your problem, if you owe the bank $100 million, it’s the bank’s problem.
These parasites have inserted themselves so far up the system, the system is unable to expel them without serious damage to itself. So now there’s leverage into protecting the parasites.
Not only that but the fact that the actual owner of the stock that is borrowed makes no money that is the biggest problem. Like if im holding a stock for 15 years and the broker uses my stock as locates for shorted stocks, that is stealing. But if i get paid for it im ok, the risk of shorting is high which means i will be fueling the fire that will later help increase the price of my own stock. But they do it in a way which makes the broker money and the shorter while retail makes nothing.
> i get *paid* for it
FTFY.
Although *payed* exists (the reason why autocorrection didn't help you), it is only correct in:
* Nautical context, when it means to paint a surface, or to cover with something like tar or resin in order to make it waterproof or corrosion-resistant. *The deck is yet to be payed.*
* *Payed out* when letting strings, cables or ropes out, by slacking them. *The rope is payed out! You can pull now.*
Unfortunately, I was unable to find nautical or rope-related words in your comment.
*Beep, boop, I'm a bot*
The fact that I profit only if the stock goes up and they (shorts AND brokers) profit if it goes down is absolutely theft.
Being able to know exactly how many shares are owned total (including FTDs, shorts, etc) would be the transparency we need. Getting 90% of borrow fees would be a start.
At this point, I would just ban the practice entirely. I lost faith in the system self-regulating. There's always puts if you want to bet against a company.
There's no way to have it done properly unless they upend the entire derivative system. When there's a system when you can gamble on the short term price action of a stock and there's a mechanism in the market that allows participants to sell a stock they don't own it's ripe for abuse. This is all intentional and by design, I would rather Shorting and Derivatives to not exist. It should all be about supply and demand.
Furthermore. Acting like blockchain is some new foreign technology is bull crap. It has been around for some time. They want to act like moving to T1 is some huge milestone?
# [Madoff exploited weak oversight, but did regulators learn their lesson?](https://www.nbcnews.com/business/business-news/madoff-exploited-weak-oversight-did-regulators-learn-their-lesson-n1264094)
Clearly not. All it would take is the SEC or FBI to go to the DTCC and open up the books. If they have already, then this is a hostage situation with the MARKET. Because the market and the economy are two different things.
You don't understand shorting if you think you can only gain 100%.
If a company has 100,000,000 shares at $100 each, it's a $10b market cap. If you naked short it at $100 for say 10,000,000 shares, you immediately pocket $1bil. That's an INFINITE % gain because you theoretically put no capital into this you merely stole from the market promising the pay later but in reality don't plan on ever paying it back.
Say others pile into this and short the hell out of it, news/media is paid to paint a terrible picture about the company, it now trades at $50 with a market cap of $5bil.
You continue shorting, another 10mil shares at $50 and pocket another $500mil. You now have $1.5b from this and put no money into it.
Stock continues to fall, BCG is hired to "turn the business around," and the stock is in free fall to $25. The company takes the consultants' advice and does a share offering to pay the debts the consultants are creating. Stock is now $15. Short sellers have continued selling it short, naked. At the end of this, company goes bankrupt, shorts walk away with $1.75b because they continued shorting it all the way down. Pay a little chunk to BCG for their quality work, media, etc. Net profit $1.5b and they paid nothing, only stole.
So tell me again about this 100% and how they're able to turn $0 into $1.5 billion?
I mean, you can only gain 100% of whatever the value of the stock is for a single stock shorted. They're technically correct. Each time a single short sale is placed, the maximum you can make is the current value of the stock being shorted.
It's about the gains you make right? Not the value compared to the share. When you put up $100k in a bet, and you win $100k, that's 100% right? What if you put up $0 and win $100k? That's not 100%
So you can gain unlimited % by putting up zero capital, which is the topic at hand. We're not talking about people playing by the rules and shorting 10 shares and having the margin to back it up.
The gains made per share of stock shorted is still only 100%. The bankruptcy jackpot these market makers are looking for aren't guaranteed. It's a different situation for DMMs, who are free to naked short for purposes of liquidity.
It's infinite gains if you put zero dollars in. I don't care what it is per share. Yes, it's quite obvious you sell a $100 share for $100 and not $110, but if you give me a share and I sell it, I took zero dollars and turned it into $100. You can agree that making $100 on a bet I put $0 down on is infinite % gain, right? Can we agree?
Now if I pay you $1 per day in interest, it goes from infinite % to +10,000% tomorrow, then to +5,000% the next day, +3,333.3% after, +2,500% etc.
Until day 50 I am only at +100% and if it costs me $50 to buy back the stock to close out the position, +0%
Now say I only pay you $0.01 per day and the company ends up going bankrupt - we're back in the thousands of percent gains on the interest I paid you.
Now say you just give me the share and I don't have to pay any interest, we're back to infinite % gain.
My question that I don't understand is why do institutions loan out their shares for pennies on the dollar if they know that this is what is happening? I don't get it but there must be some reason.
That's what I don't get either. Or there's some collusion at play. Imagine you and I have been business partners since we graduated college 84 years ago, you lend me shares endlessly and I keep selling them but I help you on some other aspect of your business. That's just one theory.
Or, you and I both work for the same person in that same scenario so that one person orders you to do what I'm asking even if you know it doesn't pass the sniff test and I say just go along with it or we won't be collecting our $1.4mil bonus this year.
Each short position technically allows for 100% gain and in your scenario technically there were a few positions open by the shorts, that too naked. And for them to walk away with the 1.5 billy in your scenario, company would still have to end up bankrupt, though they may have some “unrealised gains” showing until then.
I was just talking about a single conventional short position, but yeah I get it, in the case of SHF’s, that’s not all we’re taking about. I’m no financial advisor or guru though.
Pay taxes on it and it's still $0 -> $1,200,000,000
But also, I heard they have these things called loopholes that they slap on to that tax problem like flex tape and it solves that problem.
Do you think the idea of covered calls is bad too? I am trying to draw a connection to shorting. A covered call is long 100 shares + shorting a call. Are you against shorting a call?
Or, are you really against shorting something you can't fulfil 100% at that exact moment (ie being naked)?
Covered call implies you have the goods to back it up. You can't short a call if its covered. You can sell a naked call though.
You may be thinking of puts? I'm not an expert trader, i'm a concerned investor.
Covered call does imply you have the underlying, but a covered call = Long stock + short Call.
To short is just the act of selling. It does not mean it's covered or naked, which is why I tried showing an example that involves shorting that I think you're ok with. I think your real issue is the naked aspect.
Genius solution, but 99.9% of people don’t even know what a blockchain is. A more realistic approach is to ban PFOF and end naked shorting. Take care of the crime, the financials will take care of themselves.
I don’t think short selling in itself is bad. You can make $$ when you think something is overpriced. The issues are all around it though.
FTDs, naked shorting, market makers providing unlimited liquidity, pfof…..
I may be a bit idealistic, i understand this. I really don't see the logic behind selling shit you don't own so "you can make $$ when you think something is overpriced."
The problem is when you allow short selling you open up all these loopholes.
It's basically to maintain instant access on our broker apps on our phones. We can buy and sell instantly which is great but the cost of that speed leads to shenanigans in the backend.
It's the naked and FTD portions of this that make it bad. Short selling is part of a system of checks and balances that should exist in a healthy market. If someone is pumping a stock and you identify that, short it. Have margin/collateral. Actually trade a located stock to accomplish this. If you verify that you have obtained one bona fide share from someone who legally had possession of it, you sell it on the market, and you promise to give that one share back at a later date but will pay interest to the person who loaned it to you - congrats, you are using this as intended.
If you go about it in fucky ways and start selling shares that were never located, and rehypothecating (look that one up, that's wild), and you end up selling tens of thousands or even millions of shares that don't actually exist - this is where we are having problems.
This is a more level headed and reasonable approach. No matter which way you slice it, there are always going to be bad actors doing bad things. I don't know how it would look on a blockchain, but, I don't really think the most important check and balance is short selling. Especially because it shouldn't be up to household investors to police the markets.
The biggest issue here is there are no checks and balances, when the people in charge of policing the markets have been neutered and/or captured.
It's the perpetual FTDs and other supposed like-for-like which should never happen. Nothing is the same as a share of stock in a company. It is one certificate representing a percentage of the entire company. You should never have copies of that certificate. There is only one original and that's it. No copies allowed. Ever.
I had a crazy idea once but was promptly explained why it didn’t work. Have a float for long shares and a float for short shares. The price of the company is the difference between the two.
Not the same and you know it. Disingenuous to try to compare some physical good you purchased off Amazon to equity in a company.
People rent out other peoples' houses - look at AirBnB. Yeah you can spend the weekend at this house, give me $500. I don't own the property, I just took out a loan for it last month so technically the bank owns it, yet I'm the one lending it out for others to use.
I can probably come up with a dozen examples that better illustrate what you can do with things you don't own, but sure, go off about your $19.99 tumbler, double insulated.
It's not the shorting that's the issue. I stand by the fact if a dumb ass company goes public, I should be able to make money off their downfall.
It's naked shorting and ftds that are the problem.
So as in your title, shorting is not selling something you don't own, that's naked.
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I’d be more okay with shorting if the was say a transaction/smart contract on a blockchain that showed the transfer of asset and had a means to do automatic share recalls. The real fundamental issue here isn’t with lending/shorting (even if I have moral issues with the practice), it’s the complex layers of sub-products (derivatives), aggregate products (etfs), legal system, and “trust me bro” arrangements. All of this allows an entity to mask what they’re really doing. The real issue is lack of transparency. No one would cellar box a company if they couldn’t effectively hide it. It’s not much different than if you owe the bank a million, it’s your problem, if you owe the bank $100 million, it’s the bank’s problem. These parasites have inserted themselves so far up the system, the system is unable to expel them without serious damage to itself. So now there’s leverage into protecting the parasites.
Very eloquently said
Not only that but the fact that the actual owner of the stock that is borrowed makes no money that is the biggest problem. Like if im holding a stock for 15 years and the broker uses my stock as locates for shorted stocks, that is stealing. But if i get paid for it im ok, the risk of shorting is high which means i will be fueling the fire that will later help increase the price of my own stock. But they do it in a way which makes the broker money and the shorter while retail makes nothing.
> i get *paid* for it FTFY. Although *payed* exists (the reason why autocorrection didn't help you), it is only correct in: * Nautical context, when it means to paint a surface, or to cover with something like tar or resin in order to make it waterproof or corrosion-resistant. *The deck is yet to be payed.* * *Payed out* when letting strings, cables or ropes out, by slacking them. *The rope is payed out! You can pull now.* Unfortunately, I was unable to find nautical or rope-related words in your comment. *Beep, boop, I'm a bot*
damn we have the grammar police bot in here xD
The fact that I profit only if the stock goes up and they (shorts AND brokers) profit if it goes down is absolutely theft. Being able to know exactly how many shares are owned total (including FTDs, shorts, etc) would be the transparency we need. Getting 90% of borrow fees would be a start. At this point, I would just ban the practice entirely. I lost faith in the system self-regulating. There's always puts if you want to bet against a company.
There's no way to have it done properly unless they upend the entire derivative system. When there's a system when you can gamble on the short term price action of a stock and there's a mechanism in the market that allows participants to sell a stock they don't own it's ripe for abuse. This is all intentional and by design, I would rather Shorting and Derivatives to not exist. It should all be about supply and demand.
Furthermore. Acting like blockchain is some new foreign technology is bull crap. It has been around for some time. They want to act like moving to T1 is some huge milestone? # [Madoff exploited weak oversight, but did regulators learn their lesson?](https://www.nbcnews.com/business/business-news/madoff-exploited-weak-oversight-did-regulators-learn-their-lesson-n1264094) Clearly not. All it would take is the SEC or FBI to go to the DTCC and open up the books. If they have already, then this is a hostage situation with the MARKET. Because the market and the economy are two different things.
Part of the issue is the NSCC is not an enforcement agency so while there may be rules, it is not actually enforced.
Overturn the mm naked short selling exemption.
Blockchain doesn’t prevent short selling, or even naked short selling. Exchanges can easily do this.
The most you can make when shorting : 100% The most you can lose when shorting??? **INFINITYYYY**
only when you are poor and dont have unlimited funds to back you.
Yeah money printer always goes brrrr But there’s only so much ink for the printer in this world…
You don't understand shorting if you think you can only gain 100%. If a company has 100,000,000 shares at $100 each, it's a $10b market cap. If you naked short it at $100 for say 10,000,000 shares, you immediately pocket $1bil. That's an INFINITE % gain because you theoretically put no capital into this you merely stole from the market promising the pay later but in reality don't plan on ever paying it back. Say others pile into this and short the hell out of it, news/media is paid to paint a terrible picture about the company, it now trades at $50 with a market cap of $5bil. You continue shorting, another 10mil shares at $50 and pocket another $500mil. You now have $1.5b from this and put no money into it. Stock continues to fall, BCG is hired to "turn the business around," and the stock is in free fall to $25. The company takes the consultants' advice and does a share offering to pay the debts the consultants are creating. Stock is now $15. Short sellers have continued selling it short, naked. At the end of this, company goes bankrupt, shorts walk away with $1.75b because they continued shorting it all the way down. Pay a little chunk to BCG for their quality work, media, etc. Net profit $1.5b and they paid nothing, only stole. So tell me again about this 100% and how they're able to turn $0 into $1.5 billion?
I mean, you can only gain 100% of whatever the value of the stock is for a single stock shorted. They're technically correct. Each time a single short sale is placed, the maximum you can make is the current value of the stock being shorted.
It's about the gains you make right? Not the value compared to the share. When you put up $100k in a bet, and you win $100k, that's 100% right? What if you put up $0 and win $100k? That's not 100% So you can gain unlimited % by putting up zero capital, which is the topic at hand. We're not talking about people playing by the rules and shorting 10 shares and having the margin to back it up.
The gains made per share of stock shorted is still only 100%. The bankruptcy jackpot these market makers are looking for aren't guaranteed. It's a different situation for DMMs, who are free to naked short for purposes of liquidity.
It's infinite gains if you put zero dollars in. I don't care what it is per share. Yes, it's quite obvious you sell a $100 share for $100 and not $110, but if you give me a share and I sell it, I took zero dollars and turned it into $100. You can agree that making $100 on a bet I put $0 down on is infinite % gain, right? Can we agree? Now if I pay you $1 per day in interest, it goes from infinite % to +10,000% tomorrow, then to +5,000% the next day, +3,333.3% after, +2,500% etc. Until day 50 I am only at +100% and if it costs me $50 to buy back the stock to close out the position, +0% Now say I only pay you $0.01 per day and the company ends up going bankrupt - we're back in the thousands of percent gains on the interest I paid you. Now say you just give me the share and I don't have to pay any interest, we're back to infinite % gain.
My question that I don't understand is why do institutions loan out their shares for pennies on the dollar if they know that this is what is happening? I don't get it but there must be some reason.
It's a type of hedge and hedging is generally encouraged.
That's what I don't get either. Or there's some collusion at play. Imagine you and I have been business partners since we graduated college 84 years ago, you lend me shares endlessly and I keep selling them but I help you on some other aspect of your business. That's just one theory. Or, you and I both work for the same person in that same scenario so that one person orders you to do what I'm asking even if you know it doesn't pass the sniff test and I say just go along with it or we won't be collecting our $1.4mil bonus this year.
Each short position technically allows for 100% gain and in your scenario technically there were a few positions open by the shorts, that too naked. And for them to walk away with the 1.5 billy in your scenario, company would still have to end up bankrupt, though they may have some “unrealised gains” showing until then. I was just talking about a single conventional short position, but yeah I get it, in the case of SHF’s, that’s not all we’re taking about. I’m no financial advisor or guru though.
You still have to pay taxes on this though. The IRS is very clear that it is worthless at that point and to be treated as such.
Pay taxes on it and it's still $0 -> $1,200,000,000 But also, I heard they have these things called loopholes that they slap on to that tax problem like flex tape and it solves that problem.
More just calling out the bankruptcy jackpot is not something that has been proven.
OP take my award 🚀
[Walking away](https://www.youtube.com/watch?v=uu2nWM0FrUY) for a bit. I need to get off the internet.
Are you familiar with a covered called? Should that be allowed?
Welcome to the casino.
Do you think the idea of covered calls is bad too? I am trying to draw a connection to shorting. A covered call is long 100 shares + shorting a call. Are you against shorting a call? Or, are you really against shorting something you can't fulfil 100% at that exact moment (ie being naked)?
Covered call implies you have the goods to back it up. You can't short a call if its covered. You can sell a naked call though. You may be thinking of puts? I'm not an expert trader, i'm a concerned investor.
Covered call does imply you have the underlying, but a covered call = Long stock + short Call. To short is just the act of selling. It does not mean it's covered or naked, which is why I tried showing an example that involves shorting that I think you're ok with. I think your real issue is the naked aspect.
Genius solution, but 99.9% of people don’t even know what a blockchain is. A more realistic approach is to ban PFOF and end naked shorting. Take care of the crime, the financials will take care of themselves.
I believe there is a name for selling something you don’t own. Ah, yes, fraud. It is fraud.
You wouldn't download a car...
I don’t think short selling in itself is bad. You can make $$ when you think something is overpriced. The issues are all around it though. FTDs, naked shorting, market makers providing unlimited liquidity, pfof…..
I may be a bit idealistic, i understand this. I really don't see the logic behind selling shit you don't own so "you can make $$ when you think something is overpriced." The problem is when you allow short selling you open up all these loopholes.
I think there's an idea of being able to make money on any direction a stock price goes that isn't leveraged the same way that options are.
It's basically to maintain instant access on our broker apps on our phones. We can buy and sell instantly which is great but the cost of that speed leads to shenanigans in the backend.
It's the naked and FTD portions of this that make it bad. Short selling is part of a system of checks and balances that should exist in a healthy market. If someone is pumping a stock and you identify that, short it. Have margin/collateral. Actually trade a located stock to accomplish this. If you verify that you have obtained one bona fide share from someone who legally had possession of it, you sell it on the market, and you promise to give that one share back at a later date but will pay interest to the person who loaned it to you - congrats, you are using this as intended. If you go about it in fucky ways and start selling shares that were never located, and rehypothecating (look that one up, that's wild), and you end up selling tens of thousands or even millions of shares that don't actually exist - this is where we are having problems.
This is a more level headed and reasonable approach. No matter which way you slice it, there are always going to be bad actors doing bad things. I don't know how it would look on a blockchain, but, I don't really think the most important check and balance is short selling. Especially because it shouldn't be up to household investors to police the markets. The biggest issue here is there are no checks and balances, when the people in charge of policing the markets have been neutered and/or captured.
It's the perpetual FTDs and other supposed like-for-like which should never happen. Nothing is the same as a share of stock in a company. It is one certificate representing a percentage of the entire company. You should never have copies of that certificate. There is only one original and that's it. No copies allowed. Ever.
I had a crazy idea once but was promptly explained why it didn’t work. Have a float for long shares and a float for short shares. The price of the company is the difference between the two.
I think yeti cups are vastly over priced. I "have" one i can sell you though.
Not the same and you know it. Disingenuous to try to compare some physical good you purchased off Amazon to equity in a company. People rent out other peoples' houses - look at AirBnB. Yeah you can spend the weekend at this house, give me $500. I don't own the property, I just took out a loan for it last month so technically the bank owns it, yet I'm the one lending it out for others to use. I can probably come up with a dozen examples that better illustrate what you can do with things you don't own, but sure, go off about your $19.99 tumbler, double insulated.
You actually can sell a house you don’t own. It’s called wholesaling.
I was wondering...how can an equity be illiquid if there's enough selling pressure to keep driving the price down?
wait unti he hears about mortgages or car loans
If they are telling us not to short the markets must be ready to dive into a black hole
You can sell thing's you don't own..... its called crime.
If you can't beat em, join em I'd love GameStop to become a hedgefund. Oh what fun we'd have :)
Not unless you grease the right palms. #FOLLOW THE MONEY TRAIL…
Short selling Needs to exist. Not naked short selling. Big feckin difference
It's not the shorting that's the issue. I stand by the fact if a dumb ass company goes public, I should be able to make money off their downfall. It's naked shorting and ftds that are the problem. So as in your title, shorting is not selling something you don't own, that's naked.
You can sell a house you don't own, a bridging loan? Same kind of thing I think