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Different price prediction everyday about Bitcoin,but honestly nobody knows the future. Logic say that Bitcoin market sooner or later, have to correct to the reality levels But then again they might not I really do not know , all I know is one thing has diverse portfolio on which you trade with right signal to multiply profits. If you are already following a major strategy that operate in bull market otherwise Consult with an experienced and licensed trader who is active in the Bitcoin market..Mr Clifford..i made an investment with him and got $21,800 in first week..his the best trader I have met.. there is still opportunities to make mad Money now.. Anyone can reach him via w hat's app 👇👇 *+ 1 9 1 7 2 6 8 1 0 8 7* *Mr Clifford*
How do voting rights work in the chain of custody as far as short shares go? By your example can't there technically be infinite short shares and long shares? Also how does a market maker reconcile his books with short calls/long puts?
This was sooooooooo helpful! I didn't really understand the ins and outs of shorting, and you made it so easy to understand. You're truly a skilled teacher, which *isn't* common among people with extensive knowledge in a particular area.
WAIT A SEC... this guy ain't got no lambo, and isn't telling me ill make £1,000,000 a month from 1k investment. He's obviously a chump and doesn't know ANYTHING. For real though, I came from coffeezilla. Its been super interesting seeing what trading is actually like and why nobody who has the brain power to pay Instagram gurus for shortcuts will ever make it. Keep up the good work!
Jim chanos has been short tesla since 300 before the split, losing about 700%. I think the key is covering when ur thesis or reasoning changes or elsr u can end up broke like him.
Hi Patrick. Great video as usual. Question: The put option premium reflects predicted volatility. It seems to me that the stock borrowing rate should reflect some trade off measure between upward and downward volatility. Is there a model that relates option premiums with borrowing rates? What is the empirical relationship between the two?
A high cost of borrow can be incorporated into options pricing as a cash flow associated with owning the underlying stock, it can be treated like a continuous time dividend like cashflow.
Since we can treat the rate as a divided we can also expect that it will have an equivalent downward effect on the price right? From that it seems that we can backtrack the implied downward movement of the controversial stock. Is my reasoning correct?
Please explain/ How can a short seller borrow shares at some cost, sell those borrowed shares and then return the same said shares to the original lender?🤭☺️🤔🤔🤔 The party that buys shoted shares is making a counter bet right?
Thanks Patrick - great vid. What are the downside risks to shareholders lending their shares to short sellers? It almost seems like free money and a hedge against a declining price?
Greetings from Latvia (EU), Patrick! Many thanks for content! Never shorted a stock, but shorting bonds is very popular everywhere in form of taking mortgages to buy investment property. IMHO, as safe short get, at least while CPI is positive (on which I would bet).
Post-2020 crash, short sellers are in short supply for longs to take advantage and then pump the bubble even higher. Short sellers be careful of bear traps in the charts or in overextended valuations. The FED and longs are desperately searching for new victims to make the rich richer and the poor poorer.
Don't really understand why people say short selling. Shorting itself means selling. Like we can short or long a stock, or we can sell or buy a stock. Please let me know if I am missing something. To me, it sounds redundant.
"shorting" as verb is not selling its _short selling_. Its a two step process. Lending a asset and then selling it. Not only selling. But then there is also something like "be short" that means you bet on a down on an asset. That could be done via a various strategies you can do via derivates. But "Shorting" as basic as it can get is selling an asset which you just borrowed.
Shortselling stocks is one thing, shortselling commodities quite another. The latter is required for producers to hedge against volatilities like catastrophic harvests.
@@martinivers489 why is that unethical? Not being a prat im genuinely curious lol is it because you're thriving and profiting off of someone's misfortune or misery?
Easily the best finance content on youtube. You are very good at taking concepts which I have been trying to wrap my hobbyist investor mind around for years and making them crystal clear with the most succinct summary
short-selling only really seems profitable if you have insider knowledge (not necessarily the company, just having extreme knowledge in a volatile field, like grapes for wine production) or if you are a multi billion hedge fund that manipulates the stock
@@wangyuan0325 interest is its own time risk. It really doesn’t seem like there’s any advantage to a retail trader selling short over buying a mid-to-long term put.
I swing traded bitcoin on one of those (well all of them are tether exclusive) margin exchanges. I made some fun exciting shorts on some real dumpster dives. Wasn't in it for the leverage, so never made trade sizes that were huge. Just those that my tiny amounts $100 to $500 trade size could handle. It's not as fun as it seems though. It's the time valuation period... this applies to longing too which you could do both. You would be charged a funders fee if you were in the majority position over a period of 12 or so hours and the clock hit payment time and you were in a trade. If you were in the minority position you actually got paid the funder fees fee based on your trade size and the rate of that funders fee. Anyway, it was mix. I just broke even. Never made that many trades. And no way was I leaving the trades open for more than 24 hours (part of my problem). I also don't like stop losses, and you kind of need to set those up or face potential liquidation when you're not watching your trade. Needless to say, shorting and longing in margin is sort of a waste of time. Its promoted by affiliates as if you can make so much money. But that's why they also charge you to join their "education" club. Because they're not making anything themselves. Nobody really does. Other than the exchanges.
Short selling is very risky You have to be both correct and time it very well. I have half a dozen companies I think the share price will fall 70-80% and I am highly confident this will happen within the next 3 years however I won't short them because 1: If you put the capital into the stock market for three years you would expect about 30% return. So the shares need to fall at a minium 30% to 'break even' 2: If at any point in the next three years the shares double I would lose all of the investment even if it later indeed does fall 70-80% 3: I'm a bit paranoid that market makers in the smaller AIM markets intentionally swing the smaller stocks widely to crush such bets. Swing a share 100% up 50% down and hit the stop losses and margin calls of the smaller investors like taking candy from a baby 4: And of course I could be wrong although
You are just fantastic Patrick. Although I'm new to stock market, and not always understand every word you say, I always look forward to you vids. Doing my best to keep up but watching it a couple of times helps a lot ;-) Stay safe and looking forward for next one.
That's stupid and stressful way to make money when your Risk is infinite and most people lose their money by doing shorting selling b.c they wanna be different. or getting fast profit. if you just look at the long term view of stock you can do better by buying it. stocks are not bunch of numbers on your screen. they are business. most people never seen Real factory in their life that workers are working on them. you are not betting against Numbers. you are betting against the workers , CEO , Their product , managers , engineers and etc. so think deeply and get out of your home and check the world instead google.com and wikipedia. you will do better in stock market if you understand it as business not bunch of random numbers with Red-Green Candle sticks.
Futures I trade Long and Short, no bias, just a systematic approach. I do very well. I do well enough that if I say how well I do, people say I'm lying. But, I am involved in the markets 16 hours a day, usually not all at once, with a good deal of overnight trading during volatile markets. Stocks, my first short trade was a stock called STEC, it was also one of my first long buys. I had bought 30 shares of the stock, because it had rising EPS and meant several Growth Stock numbers. The day after I bought it, it opened down, hit my stop, and sold me out. I went back and started looking at the numbers. The way they went up seemed a little too perfect. So, I looked at it's previous low, and decided to short it if it hit that low. It did, I shorted it, put a stop in, and held it all the way to bankruptcy because it turned out it was a Fraud. I stopped shorting stocks, when I suffered a gap up, and lost 8% of my account to an unexpected move. When it comes to stocks now, I usually trade puts instead of actually shorting the stock, for three reasons, to cut my exposure, to preserve my capital, so I can make multiple trades without tying up a bunch of capital, and for the tax reasons (derivatives are taxed so much better for short term trading) . I trade with an incredibly small amount of exposure and do so with only directional trades in the market. I'm wrong with my options trading as high as 70% of the time. The thing is when I'm right, my average return can be 10 to 20X the initial investment. I put .5% of my account into an options trade. I might make 50 of these trades a year. This year I made a lot more, for a lot shorter time span, and it's been hugely profitable. There was one day, I made 13% on my account trading an Amazon Weekly puts on a Friday, it was risking, I would've likely lost all .5% of that trade if I was wrong, but, if I made that trade 20x I still only had to be right once to be profitable. I get away with it because I'm investing so little of my capital, .5%, and I usually exit the trade when I'm wrong at 25% to 50% loss of the contract, meaning I don't lose my whole investment anyways. All trades combined, it's my highest return rate with a near 7 to 1 payout on average.
It sounds like you have a good approach. Most profitable traders put in a similar level of work. I am not much of a believer in the idea of passive income from trading. In the same way that you cant just pick up a guitar and play like Hendrix, you cant just open a brokerage account and get the returns of Jim Simons. Hard work pays off.
One day I would like to see you cover the story of how Goldman was able to screw AIG on both sides by demanding their cash back from AIGs stock lending arm knowing they had invested RMBS and that the demand for cash would force them to sell allowing Goldman to get even more from their CDS deals with AIG FP
Short selling is risky, and usually doesn’t work out People still hate shortsellers with a passion, like thos guys didn’t have enough problems by themselves
Thanks Patrick. More. I have a question. Many people blame shorts for their stock going down. I hear others say shorts are good for the market. Any opinions? Not sure if you did a calls and puts video yet. Why are puts sometimes priced way above the current price?
I think the unlimited exposure to short selling is mostly just theoretical. In practice, your loss is, in a way, bounded to your margin account. If have insufficient margin, your position will be closed on your behalf. Sure, if the stock price changes drastically in a short amount of time, it could eliminate your margin and more, leaving you obligated to pay the difference. But on these same more volatile stocks, the margin requirements should be higher to compensate for that.
I successfully shorted TWTR recently when i saw the CEO report to Congress looking like the Taliban and was obviously lying to some od the questions. I've also used SQQQ to stabilize my portfolio during days with higher than normal volatility, the problem I've had with this strategy is I tend to hang onto the short too long. I've put that strategy on the back burner for now.
Why would you short a stock rather than sell a naked call? It's profitable-by-default since you start with time-premium, you don't have to pay dividends, and counterparties don't early-exercise except in predictable cases(very high dividends, if the trade goes very far against you and you're deeply ITM, if the stock becomes hard-to-borrow(because everyone else is shorting it), etc.). Why would you short a stock rather than sell a single-stock future? I saw Interactive Brokers offers them, and again: No dividends, no early-exercise risk, less margin. If I have a bunch of long stock, would trading volatility in the short direction be anti-correlated income and therefore better risk-adjusted returns? That is: buy lots of Apple, Microsoft, Amazon to get a long position; short NASDAQ index; and sell put options to cover expected losses and maybe make slight profit overall. Since short-sellers "lose by default", does that mean professionals only make large directional bets? Or do people ever make small bets: "I think this stock is 3% too high, so I'll short it" If you find companies that are unlikely-to-suddenly-rise(like a water distribution company with 2% dividends, with low growth), would it make sense to short them and use the money elsewhere(like preferred shares in a REIT that pays 6% yield)?
I see these investment strategies as fulfilling a gambling addiction. When you make money off of failure, a small group of people are incentivized to burn the whole world down. I know I am simplifying this into a base morality, but I lost a house in the 2008 financial crisis and I have seen the destruction people create when they want to make short term gains. Thank you for this explanation. I don’t work in finance, but I really try to understand finance.
If this was true before then imagine how hard it is to short now the companies like Hertz, GameStop, and AMC can go from on their way to bankruptcy to WSB meme stock darlings.
Shorted my first ever stock NKLA, at 34 down to 18 about two weeks. booked about 5000 USD less about $500 in interest. I saw friends get wrecked trying to Short TSLA before this, but the case for fraud on NKLA was much stronger. Previous to this I have tried shorting via leveraged ETFs SQQQ /SPXS and as a novice and got burned with the volatility of the Trump-China trade war. I was sucked to it from bias and FOMO.
0 dislikes wow. Really he does just give the straight truth so I guess it's not that surprising. Nothing to complain about here. Great to have content from such a knowledgable investor. He can be a bit dry, but I prefer that in my investment advice sources. Anything too exciting and its probably false and/or trying to sell you something.
Hey, you said something wrong that I don't agree with. You stated, for the most part, that shorting doesn't add any more pressure since companies can simply avoid a stock they don't like. That's not true. The act of shorting puts selling pressure on the market, affecting the price downward, from borrowed shares of people currently holding the stock. If shorting wasn't a thing, those holding the stock to loan out will probably still have that stock. The ability to short adds the ability to lower a company's price if it's overvalued, which is why many agree it's okay to keep shorting around: for the bad companies that are overvalued.
Notice how short selling is becoming less profitable over time? Markets are being rigged to go up, especially after the financial crisis of 2008/09. There is so much funny money flooding the financial markets. Shorting is not even speculation at this point, it is simply gambling. The video didn't mention it, but the other downside of shorting is that you can be right and still be wrong. If you cannot stay solvent over a short term uptrend before the crash, you get squeezed out of your short position and miss out on all the gain. So not only does your thesis have to be correct, but your timing has to be excellent to near perfect. Which frankly is simply luck, not skill.
I shorted Nikola not long after the IPO. I own a few EV stocks and had a pretty decent knowledge of the company and the position. It still made me very nervous but it ended up being profitable. I held for about a month.
I've been pondering this same question, as an individual lending shares. My greatest uncertainty is that of lending anything, is the financial position of the borrower great enough to pay you back. I'm not only talking about interest payments but also the principal value of the borrowed share. Until I understand it more I won't participate in my brokerages program to lend my shares
I love Shorting stocks. Big money is made by shorting a financial instrument than going long on it. Ex Paul Tudor Jones, Dr Micheal Burry etc. Short and right, long and wrong. This is what the markets have taught me.
@@joeblowe7545 there are Hedge funds who specialise in Shorting only but it's not common to find Smart money who likes to be only Long in the markets. Besides most of the billionaire fund managers and traders made their wealth via Shorting itself. Example Paul Tudor Jones, Michael Burry, Bill Ackman, George Soros etc. During any recession or market crashes, People having long positions lose heavily. Also Short sellers watch their risk more closely than people having long positions. Learn Shorting stocks and Indices, u will love it. 😎😎😎
Patrick makes so much sense and his easy to understand explanations and dialogue of his presentations are invaluable and totally engaging . Thanks Patrick and much appreciated
Here is an example: Borrow the share from someone and sell it on the market at 10$. You now have 10$ but also owe someone 1 share. The next day the share price drops to 9$ so you decide to close your trade. You buy the share @ 9$ and give it back to its owner. You no longer have a position but are 1$ richer (sold for 10$, bought for 9$).
Never short sold a stock, but I had mixed experiences with buying derivatives or selling derivatives that might be compared to a short. Recently I sold call options on Grenke and this trade has moved into a very good direction for me (thesis: overvaluation and fraud). Also sold a OTM call on Zoom. Thesis: Small addressed market and the stock is incredibly overvalued. This trade is a high risk, but potentially high reward. Plus, I sold OTM calls on SPY expiring end of the year. The overall portfolio is predominantly long, so if SPY moves up a lot - from a portfolio perspective it would be beneficial. On the other hand, Zoom is a bit of a risk if that company doubles from current levels. Zoom is a good company, but already valuation seems outlandish and option prices are through the roof. Absent a major short squeeze that would make Zoom eclipse McDonalds or J&J's market cap, I don't see too many issues with the trade. In the past, my problem was never that a company got turned around or that I misunderstood an economic development. BUT: I consistently underestimated how stupid most investors are. This year for example Grenke, Wirecard or the mid March Covid crash. I never expected that it would take the market months to understand what is happening. Now, I am not sure when the market will understand that Zoom might be a good company, but that the price of far OTM call options is just ridiculous.
When you buy & hold a stock (go long) you technically have unlimited upside potential but... companies don't really have unlimited growth. Even the biggest companies will get to a certain point and the profit & stock price would stay at a certain level (the peak). And some companies stock are hyped up way more than the earnings (earning per share ratio would be very high) so a correction is likely. With online trading getting more popular, you're going to see more people taking short-term profit (trading in & out) causing a lot of volatility. With so much happening in the world, it's very unlikely for most companies' share prices to head to the sky. With up & down cycles we'd see shares rise to a certain point in an economic boom and get into correction during a downturn. A correction can be more severe than before since investors no longer have to go through a middleman (broker of some sort). Buying & selling can be done directly through a home computer. When it comes to short selling, you can make as much money as the current share price * # shares & the price you buy it back * # shares (buy to cover). Or you can lose the entire amount you short-sell when the company declares bankruptcy and stops trading. A few decades ago there used to be a rule you can do short-selling when company's share price is at least $5. If it gets below $5 you're not allowed to short. Not sure if this is still the case. Holding a company stock may/ may not mean higher prices overtime. All depends on the economic situation and whether there is demand for the products / services the company is promoting. Oil for instance is way down during C-19 due to decreased demand.
I would certainly like to hear about index ETFs that are sometimes leveraged 2X and short. How does that work, and are the risks less than short selling? And are traders short selling leveraged short ETFs? Is Micheal Burry correct that the next collapse is likely going to be due to ETFs?
leveraged etfs are, as said above, for day trading only. they are risky as hell, in long run their price doesn´t make sense. you can find math bethind these on youtube i believe. also micheal burry believes that etfs don´t allow for true price discovery. but 2020 so far showed us that etfs get through stressed markets so far without failing. Maybe they are here to stay and michael burry was wrond for once. you can find more about that in imo great podcas money for the rest of us, search for some part about etfs in last 3 months
From what I’ve seen, ETFs on the wrong side of the trade can get wiped out, as in the short volatility ETFs during the volatility event in early 2018. The long volatility ETFs did fine.
Patrick ... I’m new in your channel .. but I feel that you are the real thing , so instructive and juicy all your stories.. I just love it.. with your stories I am learning how to be a better investor and on the books you advise to read ??? It’s like an enlightenment.. thank you so much to give away so much knowledge... I’m following you not to long ago.. but I’ve seen one video from a radio station also with a great guy on the lead giving you this great interview about faked investors... soooo good .. I loved it.. I gave it a try to see one of your videos on UA-cam and VOILÀ.. the best videos about investing EVER.. so real so down to earth.. and by the way... I love your sense of humor.. great job man.. keep it up.. I’m 1000% follower.. 👍👍👍
I understand using short-selling as a hedging strategy, but aside from that, why would someone want to run the risk of having unlimited downside when one can just use bearish option strategies with defined risks?
Thanks Patrick. I'm doing a financial course and your videos have become essential watching as i try to understand quantative analysis.Your final comment about looking for stocks most likely to rise is a great rule to live by!
I have shorted stocks on occasion but not recently. Often the position was generated by an assignment or early exercise on an option. Usually there was some other option position limiting the downside of such an unintended short-sale. A few comments on your video: - Buy low/ sell high applies equally well to shorting stocks if you add the caveat "either order." -Borrowing first - The idea that a short-seller borrow's the shares FIRST, is, well, a joke. In the US a broker has 2 days to deliver shares and that is an eternity in this world of high-speed-trading. A well-funded short-seller can generate a significant dilution event in a stock in 2 days and that's how a stock like GME became 138% short-sold.
I have never shorted a share or bought puts or calls. Just been trading and playing with crypto, I will have to find better brokers. Great videos man, been binging your channel
I feel like this great new video may have come partly as a result of my suggestion to do a video on long/short macro strategy haha Thanks for explaining all this. What I would have added is a bigger word of caution on shorting companies that are going bust which is really playing with fire in practice. This year we've seen very violent "pre-bankruptcy rallies" as the media dubbed them. Herzt was probably the most widely publicised one but certainly not the only. As a matter of fact, a good friend of mine decided to go short Valaris (VALPQ) - an offshore drilling company that was going bust earlier this year. So he sold short at around $0.30 right before the pre-bankruptcy rally of the stock which took it all the way to $2.19 (that would have meant a loss of around 7x the amount invested in the short position). Luckily the position was relatively small (1000 bucks or so) and he managed to wait for a few months before it went back down and he ended up selling only at a small loss. So, it's funny how short selling is said to be betting on zero but in practice you may really not want this to actually happen to the company you're shorting and get caught in the middle of a violent short squeeze. And yeah given the nature of it, it is not surprising hedge funds with short bias have done terribly on average. It may be interesting to discuss the macro long/short funds that use short position not because they bet the stock is going to zero but to hedge out risks in a respective opposite long position. To my understanding it works like this: suppose I'm bullish on any sector, say paper products, and think there is a growing demand which will be a great catalyst for earnings growth in the next 6 months to a year. Given it's a fairly commoditised sector and stocks are not particularly liquid (nothing beyond mid caps at best), I may wanna pick the best company in the sector as my long (usually the one trading at the highest multiple of all and with most pristine financial statements) and then the worst one as my short (usually the most indebted, with the worst margins and trading at the lowest multiple but still liquid enough, say, at least $1bn market cap). So what I'm hoping is to have my long position really surge and the short to stay kinda flat or even go down a bit. If I happen to be entirely wrong on the sector or there is generalised panic sell-out in the market and it all starts to go down, the idea is that the bad company (my short position) -- being the rubbish that it supposedly is -- will go down more than the good one (the long position) and I would trade out relatively unscathed out of both. I've been told by friends working in finance that this is a strategy often used by short-term investors (3 months to a year horizon) in macro strategy hedge funds. To be honest, I'm giving it a go with very small amounts of money and trying to see how it works. I find it intellectually appealing (putting my econ degree to work for once haha) and I'd really love to hear more about it by a professional like you, Patrick, as you may have used it :) Cheers! (apologies for the screed, I'm really passionate about these things)
I use short selling for pair trades. You sell short shares of a company you think will decline and use the money from the sale to buy shares of a company which you think will profit from the collaps of your short selled stock. With that you can profit double, loose double and/or you can manage your risk better.
Great video as always! 👍 I’ve got a question: 🤨 I found these words 😅. (behave today finger ski upon boy assault summer exhaust beauty stereo over). Not sure how to use them, would appreciate help. 🙏
I'm short a home-builder's ETF currently because of rising interest rates. However, I did not see anywhere how much my borrowing costs are. Calling broker Mon..............
Hi Patrick, CMC brought CFDs to Australia. We can short sell shares CFD. In the US, traders have to 'borrow' stocks to short. The other way to 'short' is buy put options. It would be interesting to your audience if you can do a video comparing the pros and cons of the three shorting instruments. What trading situation is it appropriate to use one other the others. Thanks.
It's not rocket science. Maybe pure instinct, graphs reading and guts. My best strategy was to hedge at lower price based on research and information. Ratio between volume, stock price and commission fees does impact a lot. Too low volume may result in less profit then you wont profit enough to pay commission, thus a loss trade. For Robinhood. I would rather play by myself and pay commission than to rely on those guys. Thks for video. I learn a lot more about shorting.
What cofused me. Not picking up on you saying " sell the stock short " Announcing a sale of the borrowed stock is crucial,... at the opening of the explination would help.
@pboyle how does shorting a stock via a CFD generally differ cost wise vs the more institutional preferred shorting method that you've discussed above..... is it simply about the risk as you're trading purely against your broker?
The hedging strategy means you short the stocks in the same economic sector as your long positions. For example, if you believe Microsoft has good fundamentals compared to Apple, you might want to buy Microsoft. The problem is that there might be a recession and computer sales would plummet. So you short Apple shares of equal value. If your thesis is correct, both Microsoft and Apple would fall in case of a recession, but Apple would fall further and more than cover your losses on Microsoft.
hello mr. boyle, i've found your channel lately and i really enjoy the contant. one thing is unclear to me, you said that if a stock is down to 0 the max profit is to double your money, but the way i see it (lets ignore tax and fees for a moment) if a stock losess 50% i doubled the money (sold in 100 bought in 50) and if stock is down to 0 the gain cant br messured by precentage because you cant devide to 0. looking forward for your answer, thanks.
guess I can't make much by lending my index etfs. lots of volume and liquidity. And who would short an index etf in the first place? oh well, boring invest and hold for me it is then.
8:19 Can't comprehend this. How during the uptick rule, was it "still" considered a short-sell if you were selling only when the price was rising~? I mean is it like saying you had to wait in the hopes for it to rise some before it's fall~?
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Sorry that i am so cheap that i dont pay you more than a single trade cost me :< But youre a fund manager! Its about the idea of paying you.
Stock prices fall after record date, can we short on those days??
ED means ED Ponsi
Different price prediction everyday about Bitcoin,but honestly nobody knows the future. Logic say that Bitcoin market sooner or later, have to correct to the reality levels But then again they might not I really do not know , all I know is one thing has diverse portfolio on which you trade with right signal to multiply profits. If you are already following a major strategy that operate in bull market otherwise Consult with an experienced and licensed trader who is active in the Bitcoin market..Mr Clifford..i made an investment with him and got $21,800 in first week..his the best trader I have met.. there is still opportunities to make mad Money now.. Anyone can reach him via w hat's app 👇👇
*+ 1 9 1 7 2 6 8 1 0 8 7*
*Mr Clifford*
How do voting rights work in the chain of custody as far as short shares go? By your example can't there technically be infinite short shares and long shares? Also how does a market maker reconcile his books with short calls/long puts?
This was sooooooooo helpful! I didn't really understand the ins and outs of shorting, and you made it so easy to understand. You're truly a skilled teacher, which *isn't* common among people with extensive knowledge in a particular area.
WAIT A SEC... this guy ain't got no lambo, and isn't telling me ill make £1,000,000 a month from 1k investment. He's obviously a chump and doesn't know ANYTHING.
For real though, I came from coffeezilla. Its been super interesting seeing what trading is actually like and why nobody who has the brain power to pay Instagram gurus for shortcuts will ever make it.
Keep up the good work!
great explanation. thanks, patrick! keep up the amazing work.
Best explanation that Ive heard yet! Thank you patrick
True to Pat's word, he maybe should have started off with the risk at 5:25...
I always thought short selling was a sucker's bet. Thanks Mr. Boyle, now I know.
Jim chanos has been short tesla since 300 before the split, losing about 700%. I think the key is covering when ur thesis or reasoning changes or elsr u can end up broke like him.
Hi Patrick. Great video as usual. Question: The put option premium reflects predicted volatility. It seems to me that the stock borrowing rate should reflect some trade off measure between upward and downward volatility. Is there a model that relates option premiums with borrowing rates? What is the empirical relationship between the two?
A high cost of borrow can be incorporated into options pricing as a cash flow associated with owning the underlying stock, it can be treated like a continuous time dividend like cashflow.
Since we can treat the rate as a divided we can also expect that it will have an equivalent downward effect on the price right? From that it seems that we can backtrack the implied downward movement of the controversial stock. Is my reasoning correct?
Please explain/ How can a short seller borrow shares at some cost, sell those borrowed shares and then return the same said shares to the original lender?🤭☺️🤔🤔🤔
The party that buys shoted shares is making a counter bet right?
Thanks Patrick - great vid. What are the downside risks to shareholders lending their shares to short sellers? It almost seems like free money and a hedge against a declining price?
Hinting at NKLA much?
Greetings from Latvia (EU), Patrick! Many thanks for content! Never shorted a stock, but shorting bonds is very popular everywhere in form of taking mortgages to buy investment property. IMHO, as safe short get, at least while CPI is positive (on which I would bet).
Post-2020 crash, short sellers are in short supply for longs to take advantage and then pump the bubble even higher. Short sellers be careful of bear traps in the charts or in overextended valuations. The FED and longs are desperately searching for new victims to make the rich richer and the poor poorer.
Why have gamestop and AMC shares become known as meme stock even though they are legitimate business ?
Don't really understand why people say short selling. Shorting itself means selling. Like we can short or long a stock, or we can sell or buy a stock.
Please let me know if I am missing something.
To me, it sounds redundant.
"shorting" as verb is not selling its _short selling_. Its a two step process. Lending a asset and then selling it. Not only selling. But then there is also something like "be short" that means you bet on a down on an asset. That could be done via a various strategies you can do via derivates. But "Shorting" as basic as it can get is selling an asset which you just borrowed.
My other comment was "I shorted TSLA via options". I did not sell anything expect in the end to get my gains. I bought put options.
Does robinhood allow you to lend out shares to short sellers for a small fee? Cuz so far i can only do that by selling contracts
Shortselling stocks is one thing, shortselling commodities quite another. The latter is required for producers to hedge against volatilities like catastrophic harvests.
Why is it different? Is it not about managing risks?
@@chinlim7865 If you know an exchange traded company is going to fail, you don't short. Just unethical.
@@martinivers489 why is that unethical? Not being a prat im genuinely curious lol is it because you're thriving and profiting off of someone's misfortune or misery?
It might if the central banks wouldn't be printing unlimited money 🧐
Oy vey
Thanks Patrick, you are by far the most legit financial UA-camr. Keep it up!
Easily the best finance content on youtube. You are very good at taking concepts which I have been trying to wrap my hobbyist investor mind around for years and making them crystal clear with the most succinct summary
Wow, thanks!
short-selling only really seems profitable if you have insider knowledge (not necessarily the company, just having extreme knowledge in a volatile field, like grapes for wine production) or if you are a multi billion hedge fund that manipulates the stock
I've never shorted a stock but i want to at least once just for the educational experience
I have bought put options though with a similar effect
puts are safer, but with time limit, which increases complexity, for not only being right on the direction, but also the timing.
@@wangyuan0325 interest is its own time risk. It really doesn’t seem like there’s any advantage to a retail trader selling short over buying a mid-to-long term put.
I swing traded bitcoin on one of those (well all of them are tether exclusive) margin exchanges. I made some fun exciting shorts on some real dumpster dives. Wasn't in it for the leverage, so never made trade sizes that were huge. Just those that my tiny amounts $100 to $500 trade size could handle.
It's not as fun as it seems though.
It's the time valuation period... this applies to longing too which you could do both.
You would be charged a funders fee if you were in the majority position over a period of 12 or so hours and the clock hit payment time and you were in a trade. If you were in the minority position you actually got paid the funder fees fee based on your trade size and the rate of that funders fee.
Anyway, it was mix. I just broke even. Never made that many trades. And no way was I leaving the trades open for more than 24 hours (part of my problem). I also don't like stop losses, and you kind of need to set those up or face potential liquidation when you're not watching your trade.
Needless to say, shorting and longing in margin is sort of a waste of time.
Its promoted by affiliates as if you can make so much money. But that's why they also charge you to join their "education" club. Because they're not making anything themselves. Nobody really does. Other than the exchanges.
Start out very small. Money that you wouldn't miss if you were faced with a margin call.
Short selling is very risky
You have to be both correct and time it very well. I have half a dozen companies I think the share price will fall 70-80% and I am highly confident this will happen within the next 3 years however I won't short them because
1: If you put the capital into the stock market for three years you would expect about 30% return. So the shares need to fall at a minium 30% to 'break even'
2: If at any point in the next three years the shares double I would lose all of the investment even if it later indeed does fall 70-80%
3: I'm a bit paranoid that market makers in the smaller AIM markets intentionally swing the smaller stocks widely to crush such bets. Swing a share 100% up 50% down and hit the stop losses and margin calls of the smaller investors like taking candy from a baby
4: And of course I could be wrong although
Looks like you called it
You are just fantastic Patrick.
Although I'm new to stock market, and not always understand every word you say, I always look forward to you vids. Doing my best to keep up but watching it a couple of times helps a lot ;-)
Stay safe and looking forward for next one.
Been trading since 1987. Never shorted a stock. It seems like one of the Top 5 riskiest ways to invest.
tried shorting 2 years ago, any position I hold more than a few days lights me up, ouch!
@@etotheash That’s frightening!
When short selling beware of the short squeeze or short a stock after the short squeeze common sense applies😀😀
@@titusndeto7332 so ez buy low sell high right lol wait its sell high and buy low
After suffering almost a 95% loss I will never short again.
Even if I've been shorting for years, I enjoy this video to simply recap the fundamental basics of the process. You're great!
Could you do a talk for CFDs? Your level of depth is mind blowing. Thanks for creating this channel.
CFDs the retail trader destroyer
That's stupid and stressful way to make money when your Risk is infinite and most people lose their money by doing shorting selling b.c they wanna be different. or getting fast profit. if you just look at the long term view of stock you can do better by buying it. stocks are not bunch of numbers on your screen. they are business. most people never seen Real factory in their life that workers are working on them. you are not betting against Numbers. you are betting against the workers , CEO , Their product , managers , engineers and etc. so think deeply and get out of your home and check the world instead google.com and wikipedia. you will do better in stock market if you understand it as business not bunch of random numbers with Red-Green Candle sticks.
Futures I trade Long and Short, no bias, just a systematic approach. I do very well. I do well enough that if I say how well I do, people say I'm lying. But, I am involved in the markets 16 hours a day, usually not all at once, with a good deal of overnight trading during volatile markets.
Stocks, my first short trade was a stock called STEC, it was also one of my first long buys. I had bought 30 shares of the stock, because it had rising EPS and meant several Growth Stock numbers. The day after I bought it, it opened down, hit my stop, and sold me out. I went back and started looking at the numbers. The way they went up seemed a little too perfect. So, I looked at it's previous low, and decided to short it if it hit that low. It did, I shorted it, put a stop in, and held it all the way to bankruptcy because it turned out it was a Fraud. I stopped shorting stocks, when I suffered a gap up, and lost 8% of my account to an unexpected move.
When it comes to stocks now, I usually trade puts instead of actually shorting the stock, for three reasons, to cut my exposure, to preserve my capital, so I can make multiple trades without tying up a bunch of capital, and for the tax reasons (derivatives are taxed so much better for short term trading) . I trade with an incredibly small amount of exposure and do so with only directional trades in the market. I'm wrong with my options trading as high as 70% of the time. The thing is when I'm right, my average return can be 10 to 20X the initial investment. I put .5% of my account into an options trade. I might make 50 of these trades a year. This year I made a lot more, for a lot shorter time span, and it's been hugely profitable. There was one day, I made 13% on my account trading an Amazon Weekly puts on a Friday, it was risking, I would've likely lost all .5% of that trade if I was wrong, but, if I made that trade 20x I still only had to be right once to be profitable. I get away with it because I'm investing so little of my capital, .5%, and I usually exit the trade when I'm wrong at 25% to 50% loss of the contract, meaning I don't lose my whole investment anyways. All trades combined, it's my highest return rate with a near 7 to 1 payout on average.
It sounds like you have a good approach. Most profitable traders put in a similar level of work. I am not much of a believer in the idea of passive income from trading. In the same way that you cant just pick up a guitar and play like Hendrix, you cant just open a brokerage account and get the returns of Jim Simons. Hard work pays off.
One day I would like to see you cover the story of how Goldman was able to screw AIG on both sides by demanding their cash back from AIGs stock lending arm knowing they had invested RMBS and that the demand for cash would force them to sell allowing Goldman to get even more from their CDS deals with AIG FP
Short selling is risky, and usually doesn’t work out
People still hate shortsellers with a passion, like thos guys didn’t have enough problems by themselves
Thanks Patrick. More. I have a question. Many people blame shorts for their stock going down. I hear others say shorts are good for the market. Any opinions? Not sure if you did a calls and puts video yet. Why are puts sometimes priced way above the current price?
I think the unlimited exposure to short selling is mostly just theoretical. In practice, your loss is, in a way, bounded to your margin account. If have insufficient margin, your position will be closed on your behalf. Sure, if the stock price changes drastically in a short amount of time, it could eliminate your margin and more, leaving you obligated to pay the difference. But on these same more volatile stocks, the margin requirements should be higher to compensate for that.
When you explain it sounds easy to short sale.
I successfully shorted TWTR recently when i saw the CEO report to Congress looking like the Taliban and was obviously lying to some od the questions.
I've also used SQQQ to stabilize my portfolio during days with higher than normal volatility, the problem I've had with this strategy is I tend to hang onto the short too long. I've put that strategy on the back burner for now.
Merci Patrick, super intéressant, c'est la première fois que je ne vois aucun dislike...
Why would you short a stock rather than sell a naked call? It's profitable-by-default since you start with time-premium, you don't have to pay dividends, and counterparties don't early-exercise except in predictable cases(very high dividends, if the trade goes very far against you and you're deeply ITM, if the stock becomes hard-to-borrow(because everyone else is shorting it), etc.).
Why would you short a stock rather than sell a single-stock future? I saw Interactive Brokers offers them, and again: No dividends, no early-exercise risk, less margin.
If I have a bunch of long stock, would trading volatility in the short direction be anti-correlated income and therefore better risk-adjusted returns? That is: buy lots of Apple, Microsoft, Amazon to get a long position; short NASDAQ index; and sell put options to cover expected losses and maybe make slight profit overall.
Since short-sellers "lose by default", does that mean professionals only make large directional bets? Or do people ever make small bets: "I think this stock is 3% too high, so I'll short it"
If you find companies that are unlikely-to-suddenly-rise(like a water distribution company with 2% dividends, with low growth), would it make sense to short them and use the money elsewhere(like preferred shares in a REIT that pays 6% yield)?
I see these investment strategies as fulfilling a gambling addiction. When you make money off of failure, a small group of people are incentivized to burn the whole world down. I know I am simplifying this into a base morality, but I lost a house in the 2008 financial crisis and I have seen the destruction people create when they want to make short term gains. Thank you for this explanation. I don’t work in finance, but I really try to understand finance.
I was short selling Nikola based on a fake hype they created about themselves. Earned about £200.
If this was true before then imagine how hard it is to short now the companies like Hertz, GameStop, and AMC can go from on their way to bankruptcy to WSB meme stock darlings.
Shorted my first ever stock NKLA, at 34 down to 18 about two weeks. booked about 5000 USD less about $500 in interest. I saw friends get wrecked trying to Short TSLA before this, but the case for fraud on NKLA was much stronger. Previous to this I have tried shorting via leveraged ETFs SQQQ /SPXS and as a novice and got burned with the volatility of the Trump-China trade war. I was sucked to it from bias and FOMO.
oh and thanks again for the great content - getting schooled.
0 dislikes wow. Really he does just give the straight truth so I guess it's not that surprising. Nothing to complain about here. Great to have content from such a knowledgable investor. He can be a bit dry, but I prefer that in my investment advice sources. Anything too exciting and its probably false and/or trying to sell you something.
Also I never do bearish trades (unless you count covered calls, which you shouldn't because overall delta is still positive).
HAHA 1 dislike probably because of this post.
Hey, you said something wrong that I don't agree with. You stated, for the most part, that shorting doesn't add any more pressure since companies can simply avoid a stock they don't like. That's not true. The act of shorting puts selling pressure on the market, affecting the price downward, from borrowed shares of people currently holding the stock. If shorting wasn't a thing, those holding the stock to loan out will probably still have that stock. The ability to short adds the ability to lower a company's price if it's overvalued, which is why many agree it's okay to keep shorting around: for the bad companies that are overvalued.
Notice how short selling is becoming less profitable over time? Markets are being rigged to go up, especially after the financial crisis of 2008/09. There is so much funny money flooding the financial markets. Shorting is not even speculation at this point, it is simply gambling.
The video didn't mention it, but the other downside of shorting is that you can be right and still be wrong. If you cannot stay solvent over a short term uptrend before the crash, you get squeezed out of your short position and miss out on all the gain.
So not only does your thesis have to be correct, but your timing has to be excellent to near perfect. Which frankly is simply luck, not skill.
In what other industry is it legal to sell something you don't actually own?
Real estate, in most cases, but you make a good point.
Now almost in 2023 I would heavy sell short on Meta Platforms !
Sounds pretty risky, surely if i put all my account in a short trade it wont go wrong right?! :3
Yeah.
I shorted BitCoin at $118.
Just hanging in there, waiting for it to comeback down.
Fingers crossed..🤞🤞🤞
PJ...
a good time to be selling short today? Super high and everything
If you need to ask this question you are better off not touching the market
short near term futures without using leverage and keep rolling
I've watched a multiple videos on short selling and the more I understand it, the less understand why people are interested in it.
I shorted Nikola not long after the IPO. I own a few EV stocks and had a pretty decent knowledge of the company and the position. It still made me very nervous but it ended up being profitable. I held for about a month.
Wow, short *interest* returns are astounding, why don't all institutions utilize them? Where is the hidden risk?
I've been pondering this same question, as an individual lending shares. My greatest uncertainty is that of lending anything, is the financial position of the borrower great enough to pay you back.
I'm not only talking about interest payments but also the principal value of the borrowed share. Until I understand it more I won't participate in my brokerages program to lend my shares
Because it's insanely risky. You can literally lose an infinite amount of money. Infinite!
@@cybercab
You misunderstood me.
I was talking about the position of the share lender, not the short position.
@@eliyasne9695 Ah! I did misunderstand. That makes more sense. lol. Scared me for a moment!
GME short position holders on this video taking notes and crying lol
I love Shorting stocks. Big money is made by shorting a financial instrument than going long on it. Ex Paul Tudor Jones, Dr Micheal Burry etc. Short and right, long and wrong. This is what the markets have taught me.
That's until you get burned badly. Not wishing this upon you, but don't think you're too smart or immune.
@@joeblowe7545 there are Hedge funds who specialise in Shorting only but it's not common to find Smart money who likes to be only Long in the markets. Besides most of the billionaire fund managers and traders made their wealth via Shorting itself. Example Paul Tudor Jones, Michael Burry, Bill Ackman, George Soros etc. During any recession or market crashes, People having long positions lose heavily. Also Short sellers watch their risk more closely than people having long positions. Learn Shorting stocks and Indices, u will love it. 😎😎😎
At 6:35, was that a cheeky jab at Bill Ackman shorting Herbalife? 😏
Patrick makes so much sense and his easy to understand explanations and dialogue of his presentations are invaluable and totally engaging . Thanks Patrick and much appreciated
Sorry couldn’t understand 2:22 how a trader would make profit when selling a share at lower price, rebuying it, and then returns it to its owner?
Here is an example: Borrow the share from someone and sell it on the market at 10$. You now have 10$ but also owe someone 1 share. The next day the share price drops to 9$ so you decide to close your trade. You buy the share @ 9$ and give it back to its owner. You no longer have a position but are 1$ richer (sold for 10$, bought for 9$).
As he said you are rebuying (not selling) at a lower price
Never short sold a stock, but I had mixed experiences with buying derivatives or selling derivatives that might be compared to a short.
Recently I sold call options on Grenke and this trade has moved into a very good direction for me (thesis: overvaluation and fraud). Also sold a OTM call on Zoom. Thesis: Small addressed market and the stock is incredibly overvalued. This trade is a high risk, but potentially high reward. Plus, I sold OTM calls on SPY expiring end of the year. The overall portfolio is predominantly long, so if SPY moves up a lot - from a portfolio perspective it would be beneficial. On the other hand, Zoom is a bit of a risk if that company doubles from current levels. Zoom is a good company, but already valuation seems outlandish and option prices are through the roof. Absent a major short squeeze that would make Zoom eclipse McDonalds or J&J's market cap, I don't see too many issues with the trade.
In the past, my problem was never that a company got turned around or that I misunderstood an economic development. BUT: I consistently underestimated how stupid most investors are. This year for example Grenke, Wirecard or the mid March Covid crash. I never expected that it would take the market months to understand what is happening. Now, I am not sure when the market will understand that Zoom might be a good company, but that the price of far OTM call options is just ridiculous.
Here is an explanation on my short on Zoom. It is in German though. ua-cam.com/video/INvW5QDdNuI/v-deo.html
When you buy & hold a stock (go long) you technically have unlimited upside potential but... companies don't really have unlimited growth. Even the biggest companies will get to a certain point and the profit & stock price would stay at a certain level (the peak). And some companies stock are hyped up way more than the earnings (earning per share ratio would be very high) so a correction is likely. With online trading getting more popular, you're going to see more people taking short-term profit (trading in & out) causing a lot of volatility. With so much happening in the world, it's very unlikely for most companies' share prices to head to the sky. With up & down cycles we'd see shares rise to a certain point in an economic boom and get into correction during a downturn. A correction can be more severe than before since investors no longer have to go through a middleman (broker of some sort). Buying & selling can be done directly through a home computer.
When it comes to short selling, you can make as much money as the current share price * # shares & the price you buy it back * # shares (buy to cover). Or you can lose the entire amount you short-sell when the company declares bankruptcy and stops trading. A few decades ago there used to be a rule you can do short-selling when company's share price is at least $5. If it gets below $5 you're not allowed to short. Not sure if this is still the case.
Holding a company stock may/ may not mean higher prices overtime. All depends on the economic situation and whether there is demand for the products / services the company is promoting. Oil for instance is way down during C-19 due to decreased demand.
Are ETF's good for beginners?
Its not good, I think its the best. cause ur not just buying 1 stock
r/wallstreetbets is the place where short sellers live in harmony and peace
i keep shorting crypto all the time, works well
I would certainly like to hear about index ETFs that are sometimes leveraged 2X and short. How does that work, and are the risks less than short selling? And are traders short selling leveraged short ETFs? Is Micheal Burry correct that the next collapse is likely going to be due to ETFs?
SQQQ is a 3x short for the NASDAQ.
using it for day trades only is highly recommended.
leveraged etfs are, as said above, for day trading only. they are risky as hell, in long run their price doesn´t make sense. you can find math bethind these on youtube i believe.
also micheal burry believes that etfs don´t allow for true price discovery. but 2020 so far showed us that etfs get through stressed markets so far without failing. Maybe they are here to stay and michael burry was wrond for once. you can find more about that in imo great podcas money for the rest of us, search for some part about etfs in last 3 months
"How does that work"
I think the ETF basically contains derivatives the follow the index inversely.
From what I’ve seen, ETFs on the wrong side of the trade can get wiped out, as in the short volatility ETFs during the volatility event in early 2018. The long volatility ETFs did fine.
Study "contango" and "backwardation".
You really should know the mechanics behind those two functions before investing.
Thanks for another great video! I have only shorted VIX and UVXY. Maybe that could be a topic for another video.
Great Video! Thank you!
Glad you liked it!
Patrick ... I’m new in your channel .. but I feel that you are the real thing , so instructive and juicy all your stories.. I just love it.. with your stories I am learning how to be a better investor and on the books you advise to read ??? It’s like an enlightenment.. thank you so much to give away so much knowledge... I’m following you not to long ago.. but I’ve seen one video from a radio station also with a great guy on the lead giving you this great interview about faked investors... soooo good .. I loved it.. I gave it a try to see one of your videos on UA-cam and VOILÀ.. the best videos about investing EVER.. so real so down to earth.. and by the way... I love your sense of humor.. great job man.. keep it up.. I’m 1000% follower.. 👍👍👍
I tried to short Tesla and got killed....
I understand using short-selling as a hedging strategy, but aside from that, why would someone want to run the risk of having unlimited downside when one can just use bearish option strategies with defined risks?
You have a defined risk here too, but a bit scarier - can't lose more than what's on a margin account
Top notch as usual 👍
Thanks Patrick. I'm doing a financial course and your videos have become essential watching as i try to understand quantative analysis.Your final comment about looking for stocks most likely to rise is a great rule to live by!
short on spread betting...and add to the position
Made huge loss never tried again😅
I have shorted stocks on occasion but not recently. Often the position was generated by an assignment or early exercise on an option. Usually there was some other option position limiting the downside of such an unintended short-sale.
A few comments on your video:
- Buy low/ sell high applies equally well to shorting stocks if you add the caveat "either order."
-Borrowing first - The idea that a short-seller borrow's the shares FIRST, is, well, a joke. In the US a broker has 2 days to deliver shares and that is an eternity in this world of high-speed-trading. A well-funded short-seller can generate a significant dilution event in a stock in 2 days and that's how a stock like GME became 138% short-sold.
I have never shorted a share or bought puts or calls. Just been trading and playing with crypto, I will have to find better brokers. Great videos man, been binging your channel
For advice in short selling we should ask Melvin Capital. GME to the Moon
You poping off on tube bra.
You explain things very well. :)
Glad it was helpful!
Be my lecturer please, love from Singapore
I feel like this great new video may have come partly as a result of my suggestion to do a video on long/short macro strategy haha Thanks for explaining all this. What I would have added is a bigger word of caution on shorting companies that are going bust which is really playing with fire in practice. This year we've seen very violent "pre-bankruptcy rallies" as the media dubbed them. Herzt was probably the most widely publicised one but certainly not the only. As a matter of fact, a good friend of mine decided to go short Valaris (VALPQ) - an offshore drilling company that was going bust earlier this year. So he sold short at around $0.30 right before the pre-bankruptcy rally of the stock which took it all the way to $2.19 (that would have meant a loss of around 7x the amount invested in the short position). Luckily the position was relatively small (1000 bucks or so) and he managed to wait for a few months before it went back down and he ended up selling only at a small loss. So, it's funny how short selling is said to be betting on zero but in practice you may really not want this to actually happen to the company you're shorting and get caught in the middle of a violent short squeeze. And yeah given the nature of it, it is not surprising hedge funds with short bias have done terribly on average. It may be interesting to discuss the macro long/short funds that use short position not because they bet the stock is going to zero but to hedge out risks in a respective opposite long position.
To my understanding it works like this: suppose I'm bullish on any sector, say paper products, and think there is a growing demand which will be a great catalyst for earnings growth in the next 6 months to a year. Given it's a fairly commoditised sector and stocks are not particularly liquid (nothing beyond mid caps at best), I may wanna pick the best company in the sector as my long (usually the one trading at the highest multiple of all and with most pristine financial statements) and then the worst one as my short (usually the most indebted, with the worst margins and trading at the lowest multiple but still liquid enough, say, at least $1bn market cap). So what I'm hoping is to have my long position really surge and the short to stay kinda flat or even go down a bit. If I happen to be entirely wrong on the sector or there is generalised panic sell-out in the market and it all starts to go down, the idea is that the bad company (my short position) -- being the rubbish that it supposedly is -- will go down more than the good one (the long position) and I would trade out relatively unscathed out of both. I've been told by friends working in finance that this is a strategy often used by short-term investors (3 months to a year horizon) in macro strategy hedge funds. To be honest, I'm giving it a go with very small amounts of money and trying to see how it works. I find it intellectually appealing (putting my econ degree to work for once haha) and I'd really love to hear more about it by a professional like you, Patrick, as you may have used it :) Cheers! (apologies for the screed, I'm really passionate about these things)
I use short selling for pair trades.
You sell short shares of a company you think will decline and use the money from the sale to buy shares of a company which you think will profit from the collaps of your short selled stock.
With that you can profit double, loose double and/or you can manage your risk better.
Great video as always! 👍 I’ve got a question: 🤨 I found these words 😅. (behave today finger ski upon boy assault summer exhaust beauty stereo over). Not sure how to use them, would appreciate help. 🙏
I'm short a home-builder's ETF currently because of rising interest rates. However, I did not see anywhere how much my borrowing costs are. Calling broker Mon..............
I know of short selling for awhile but only started doing it with Nikola this year @34
Hi Patrick, CMC brought CFDs to Australia. We can short sell shares CFD. In the US, traders have to 'borrow' stocks to short. The other way to 'short' is buy put options. It would be interesting to your audience if you can do a video comparing the pros and cons of the three shorting instruments. What trading situation is it appropriate to use one other the others. Thanks.
I would also want to see this type of a video ❤ (Afaik it hasn’t been released in the last 2 years since you posted your comment 😆).
Please make me a video how to participate on credit default swaps as retail customer. I know youre good enough for solving this problem.
I've never done it, don't plan on doing it either.
We’ll explained. Thanks. Alot.
This video is super informative but I keep coming back just because of the smile in the thumbnail😂. It's just so perfect.
Something changed with this video to come up on my recommended, Well played Patrick. Well played... you smart fella (Fart smella)
It's not rocket science. Maybe pure instinct, graphs reading and guts.
My best strategy was to hedge at lower price based on research and information.
Ratio between volume, stock price and commission fees does impact a lot.
Too low volume may result in less profit then you wont profit enough to pay commission, thus a loss trade.
For Robinhood. I would rather play by myself and pay commission than to rely on those guys.
Thks for video. I learn a lot more about shorting.
What cofused me.
Not picking up on you saying " sell the stock short "
Announcing a sale of the borrowed stock is crucial,... at the opening of the explination would help.
@pboyle how does shorting a stock via a CFD generally differ cost wise vs the more institutional preferred shorting method that you've discussed above..... is it simply about the risk as you're trading purely against your broker?
Stock trading sounds like a gambling game. There is so much manipulation I will never buy stock.
The hedging strategy means you short the stocks in the same economic sector as your long positions. For example, if you believe Microsoft has good fundamentals compared to Apple, you might want to buy Microsoft. The problem is that there might be a recession and computer sales would plummet. So you short Apple shares of equal value. If your thesis is correct, both Microsoft and Apple would fall in case of a recession, but Apple would fall further and more than cover your losses on Microsoft.
Shorted Apple back in the 90's. Made a profit, but longest week of my life. :-)
hello mr. boyle, i've found your channel lately and i really enjoy the contant.
one thing is unclear to me, you said that if a stock is down to 0 the max profit is to double your money, but the way i see it (lets ignore tax and fees for a moment) if a stock losess 50% i doubled the money (sold in 100 bought in 50) and if stock is down to 0 the gain cant br messured by precentage because you cant devide to 0.
looking forward for your answer, thanks.
guess I can't make much by lending my index etfs. lots of volume and liquidity. And who would short an index etf in the first place? oh well, boring invest and hold for me it is then.
8:19 Can't comprehend this. How during the uptick rule, was it "still" considered a short-sell if you were selling only when the price was rising~? I mean is it like saying you had to wait in the hopes for it to rise some before it's fall~?