/biz/ - Business & Finance

1. You take out a loan
2. You pay it back

>>26812351

Little old lady got manipulated late last night. Werewolves of wall street again! Howhooooooo

they wont have to pay - massive collusion is happening right now and the stock is being delisted (making it impossible for people to buy - but they can still sell) - price will drop to below 200 today and below 60 tomorrow (right on time so the hedgefunds take just a little loss, slap on the wrist).

2-3 million americans will lose about 10 billion in gains and about 500 million - 2 billion of their own money.

actual robbery, robin hood robin the poor to pay the rich.

>>26812351
I understand the concept of a short.
But who and how do you decide when to pay back the owner of the stock you shorted.
Am I correct in understanding that if it goes bankrupt, there is no stock left so you pay nothing.
But wouldn't the guy you borrowed from just ask for his money right before that, to get some return?

Are shorts agreed upon a certain day where they end? Or how does the time frame work?

>>26812407
But do you really? If both sides are jews, can't they just negotiate that "I'll pay you this amount of money, so that I don't owe you any stocks anymore"?

>>26813090
sounds epic to me

Monkeyfund think nobody want banana so they sell banana and promise to buy back banana for lower price so they make banana profit

Other monkey not happy and start wanting banana so all buy banana increase price of banana

Monkeyfund promised to buy banana now must pay for banana

>>26813706
now thats clear

>>26812351
>melvin borrows his friends car
>sells it to hobo1 for 200$
>melvin then borrows the same car again from hobo1
>sells it to hobo2 for 200$
melvin has now sold 200% of his friends car and has $400 in cash. the problem is that there are two people waiting for him to return "their" car. melvin is a retard and is gambling on the fact that the value of the car will decrease.
>melvin causes hobo2 to crash the car rendering it pretty much worthless
>hobo2 sells it back to melvin for $100
>melvin now has $300 and the car
>he gives the car back to hobo1
>hobo1 obviously doesnt want a ruined car
>therefore he sells it back to melvin again for $100
>now melvin has $200 of pure profit
>melvin now goes to the actual owner
>heres your car bro
BUT the plot twist is that hobo2 was actually /biz/ and wsb in disguise all along.
now they are claiming that the car actually is worth $1000 because they happen to like the car. melvins friend is pressuring him to return his fucking car, but there is no way melvin has the money to pay $1000 for a ruined car. as long as wsb & /biz/ doesnt fold and give him a better price melvin is completely fucked and has to declare bankruptcy.

>>26812351

You need to first under stand a couple of concepts.

When an investor takes a short position they are basically betting on the price going down. To do this they effectively "borrow" the stock from somewhere at a predetermined price which they have to pay back later.
For example I think that ABC Corp is overprice at the current price of $100 and believe it will drop down to $50 in the coming months.
I then "borrow" 100 units of said stock for $100 per stock to be paid back in six months time and sell it. If the price goes down to $50, then I will buy 100 units from the market at $50 in six months and I have a profit of 100x$50 dollars = $5000. If the market moves against me however and the prices goes up to $200 per stock then I will have to buy those from the market at $200x100 = $20000, so I will be down $10000 from my initial outlay.
Even though it's not quite this simple, let's use GME as an example:

Hedge funds bet that price will go from $10 to $2 and they buy 5m units.
But actually the price goes up to $500, they are then liable going to be 5m * $490 out of pocket which is $2.45b.

>>26814832

Sorry, some very poor grammar in there as rushed it at work.

But basically the funds need to give back the stock they borrowed and if they don't have the stock at hand then they need to buy it from the market at today's prices.

>>26813090
Can't you just use your bank to buy if the apps block trading?

>>26814832
>"borrow" the stock from somewhere at a predetermined price which they have to pay back later.

When is "later"? Do they agree on that beforehand? Or can the guy who own the share ask for the payback anytime? Are there different options?

>>26813392

>But who and how do you decide when to pay back the owner of the stock you shorted.

You pay what's called margin which goes up or down depending on whether the position moves for or against you.

>Am I correct in understanding that if it goes bankrupt, there is no stock left so you pay nothing
There would be quite a healthy margin to pay to the client, the shorter would generally close out the position and crystallise the loss before then, no one really wants to go bust.

>But wouldn't the guy you borrowed from just ask for his money right before that, to get some return?
This is the purpose of the market makers/brokers, they function as middle men to help mitigate counterparty risk (the person on the other side of the trade defaulting)

>Are shorts agreed upon a certain day where they end? Or how does the time frame work?

Yes, options all have a expiry date at which point they are "in the money" or "out of the money"

>>26815628

So it's not really this sort of lending your friend money, it's usually done via derivative contracts such as options. So the "borrow" is created synthetically, so no physical delivery takes place until settlement. There is also stock lending and again this will be subject to some contractual timeframe.

>>26816034
Okay, I get that. But I still don't understand when the guy who shorted has to pay up if the stock rises?

Can someone explain the 140% I keep seeing? How can they be obligated to buy back 140% of stock? Was it just a clerical error? It seems like a surefire way to lose money if you're in a contract to buy back all the stock on the market, and then some.

>>26815663
Thanks breh

>>26812351
Here's a simple example for you anon
>borrow a $10 share from Bob
>immediately sell it for $10
>hope that the share goes down in price to say $8
>rebuy the share at $8
>return the now cheaper share to Bob
>pocket the $2 difference
You can see how a contractual obligation to return a $10 share to Bob could go wrong when his $10 share suddenly becomes a $500 share, and you didn't just borrow a single share but a thousand shares

>>26816471
Shorting is based on loaned shares, so the owner of the share will have a time set in the contract that the share must be returned by.

>>26816471

There are four basic ways you can enter into an options contract:

Buy calls - You buy the right to buy stock from the seller at a price decided today at a future date. This is a LONG view as if the price increases above the strike then you will make money. You pay a price known as a premium for each contract. The most you can lose is the number of contracts you have multiplied by this premium.

Buy puts - This gives you the right to sell stock to the person on the other side of the contract at a price determined today at a given date in the future .This is a SHORT view as if the price decreases below the strike then you will make money. You pay a price known as a premium for each contract. The most you can lose is the number of contracts you have multiplied by this premium.

>>26816958
So why does Bob lend the stock in the first place? Is it just because he doesn't have access to the information you have, and doesn't know it will go down? Wouldn't it be better for Bob to sell his stock himself at $10 rather than loan it and get it back once it's dropped in value?

>>26814395
>>26816558
Yes it is very risky and naked shorting is illegal.
Still there are plenty of legal loopholes i dont understand.
They keep shorting more and more because borrowing and then selling dumps the price. That causes all the pussies to lose faith and sell as well, reducing their losses and killing the hype. They got into this mess in the first place because they were trying to bankrupt the company and return shares worth literally $0 instead of being satisfied with a more modest profit.

>>26817310

Sell calls - This is where you sell the right to buy stock off you in the future for a price decided today. This is a SHORT because you are hoping that the price decreases and you get to keep the premium the buyer paid for each contract. The losses you can have on this are technically unlimited depending on how high the stock price rises.

Sell puts - You enter a contract where you give the person on the other side to sell stock to you on a given date for a price decided today. This is a LONG view as you are betting the stock price will increase and you can keep the contract premium paid by the buyer. The maximum loss here is the difference between the strike price and zero multiplied by the number of contracts.

>>26817394
Anyone?

Given the efficient market theory both parties should have access to the same information. So why would he lend it away? Just a gamble?

>>26813641
That is basically what a short sale is. The Jews borrow stocks from the kikes at $10 a share and sell them. The "loan" is due Friday and the Jews are betting on the stock being $9 by that time. But if the stock is $11 per share they have to pay it all back plus the +$1.

>>26818719
>>26817394

They will either be hedging (managing risk) or speculating (they have performed analysis on the market and think the stock will go a certain way).

After reading some of the comments in here and replying to a few, I would strongly recommend staying away from options unless you understand the mechanics of the market. You will get burned.

>>26812728
Based Zevon poster

>>26812351
you borrow the stocks at a higher price
then return the same stocks to the lender at the lower price(I don't know how the time period is agreed upon)
the lenders get their stocks back and the borrower(shorter) gets the profit(difference between high and low price)

>>26819472
Let them find out for themselves.

>>26813090
>making it impossible for people to buy - but they can still sell

How the fuck can they "sell" if there is no buyer on the other side of the transaction?

They sold stocks they don't own. They have a debt to pay.