Aces High Stock Market Game...

[lasersailor184]

Oh, I get it (possibly).  Either way the short sell goes (to the benefit or pain of the shorter), the brokerage firm makes money.

I.E. If I short sell something, and the price goes down, soon I'll have to purchase the shares again and give them back.  The brokerage firm didn't have to sit there and lose money on their stock, but have the stock which has the possibility of going up.

Or if I short something, and it goes up, I lose money but the brokerage firm reclaims those shares which are suddenly more valuable.


Wait a second, scenario A doesn't make any sense.  If the price goes down, the brokerage firm loses money because in the end they are holding onto the same number of shares that are worth less.

So why would any brokerage firm take that risk?  Or is it a risk that they are hoping would screw the trader but benefit themselves?

[DieAz]

Originally posted by lasersailor184

Wait a second, scenario A doesn't make any sense.  If the price goes down, the brokerage firm loses money because in the end they are holding onto the same number of shares that are worth less.

So why would any brokerage firm take that risk?  Or is it a risk that they are hoping would screw the trader but benefit themselves?

yes a brokerage makes money, whether stocks do good or bad. $7-$30 a trade, plus a percentage of the value for certain types of trades.

read the FAQ in the link in my previous post, for how short selling works.

as for why they would take the risks, well for one, to keep a paying customer happy, and they are not really risking anything.
the reason is, some people buy a stock and hold it for a long long time, knowing historically the price is going up. as long as the company is making money, goods, growing the business, expanding, etc. the stocks value will go up.

anyway back to the point.

 the short seller is borrowing stock from some one who is going to hold it for a long time.
selling short is usually a short term contract, borrow the stock for a certain period of time. say for example; 120 days. that means the short seller hopes the price drops lower before the 120th day, so they can buy to cover to make money. they can buy to cover the day after they sold it short, if they wanted to.
but if it never does drop lower, and keeps going up, at the end of 120 days of the contract the short seller has to buy to cover. and it may very well cost the short seller a lot more than what they got for selling it short.

[Curval]

BOOYAH.

Master Bates makes first place.....for a little while only though I'm sure.

[BlueJ1]

Originally posted by Curval
BOOYAH.

Master Bates makes first place.....for a little while only though I'm sure.

Because I sold all my stocks.

[Curval]

Originally posted by BlueJ1
Because I sold all my stocks.

As did I.

[rpm]

Anyone notice who has the highest percentage of return on friday?
Bada Bing Bada BOOYAH!!

[DieAz]

Originally posted by rpm
Anyone notice who has the highest percentage of return on friday?
Bada Bing Bada BOOYAH!!

 
I gotta ask, why are you using a buy limit?

looking at your transactions; looks like you doing it backwards.
if this is what you do in real life, I'd be

far as I know, most use a sell limit. as in buy at market, then sell limit good til cancel for a couple $ more. or sell short at market, then buy to cover limit good til cancelled for a few $ less, hopefully before the contract runs out.

maybe use buy limit good til cancelled for when price drops to a certain level below what the current price is, then maybe a sell limit good til cancelled for a few $ more.

some use sell limit good until cancelled, to limit the losses after making some nice gains on a stock.

just remember one thing, no matter how much the price drops after you buy it. you don't really lose anything, until you sell it at a loss. chances are, over the long term, the price will go higher and then you can sell at a profit.

if you happen to look at my history in transactions, some didn't go through as the way I intended the transaction to be. delayed updates in browser ect. took awhile to figure out how this game worked.

[Nilsen]

In real life only the fool, or the desperate does _not_ use buy and sell-limit. This game is not representative of the real market tho.

[rpm]

If I understand it correctly (and I may well not) the buy limit will not purchase over the price I have set. With the slow moving trades and fast moving market I don't want to miss a spike and buy too late.

[Nilsen]

Originally posted by rpm
If I understand it correctly (and I may well not) the buy limit will not purchase over the price I have set. With the slow moving trades and fast moving market I don't want to miss a spike and buy too late.

Yup.. buy limit sets the max ammount you want to pay for a stock. In real life you need to set that limit or you may end up paying top $ and be the "chump" that got in on top because there is always a que. If you dont get it at the price you want then accept that you have not, and move on. (again.. in RL)

[rpm]

That's what I thought. I had 1 trade go very bad early on and lost $4 a share on 10,000. That's when I started watching Jim Cramer's Mad Money on CNBC. He's been very educational. I think I'll do much better in the next round.

[Nilsen]

I havent done any trading this week at all (on vacation) and it shows

[SaburoS]

Originally posted by DieAz
this got me to thinking, what would happen if you sold a stock short and it splits 2 for 1,  the price per share is now 50% of what it was. would you still buy to cover the same amount of shares or ?????

(Edit) basically the question is what happens if a stock splits on the share sold short?

Forgot to post on this sooner, just been real busy.

Just a guess but the following makes sense:

Well two things happen.
1) You now have two shares where you had one. The value gets halved/share, the total value remains the same as long as nothing else changes.
2) The share value to cover is also halved but the shares to cover has doubled, again, effectively the total value remains the same.

Example:
You sell short 100 shares of stock valued at $500.00. You have a total invested of $5,000.00. It then splits 2 for 1. You now have 200 shares valued @$250.00 for the same total of $5,000.00.
The break even *buy to cover* price now also dropped from $500.00 to the same $250.00/share.
What used to affect the price to drop (again for example) say $100.00 from $500.00 to $400.00@ now affects the split shares @$50.00 from $250.00 to $200.00/share.

You now *buy to cover* for a total of $10,000.00 profit (200 x $50.00 = $10,000.00). If the stock did not split 2 for 1, the total outcome would be the same. $100.00 drop/share for the 100 shares.
The total value lost in the above example would be the same regardless of the number of shares outstanding.

Man, 3:40 am so I am very tired...hope it makes sense.

[Curval]

4 days left gentlemen.

[rpm]

Earnings reports out today.

LLET'S GET READY TO RUMBLLLLLLLLLLLLLLLE!!