Shorting a stock is essentially selling a stock that you don't own because you think that it will go down in value. You then have to buy it back (hopefully at a lower price). It is what allows you make money in a down market.
I guess in the order of investing, experience goes: -Going long on a stock (regular buy of a stock) -Going short on a stock (selling stock that you do not own, with promise to buy it back -Buying call options (buying the option to buy a stock at a particular [strike] price. If the stock moves up, you can exercise or sell the option and make LOTS of money.) -Buying put options (buying the option to sell a stock at a particular [strike] price. If the stock moves down, you can exercise or sell the option and make LOTS of money.)
Warnings - shorting if the stock moves up quickly can lead to great losses, so you have to watch it carefully OR you should set stop losses (on all your trades. Longs included. Technical Analysis can help you choose the appropriate stop loss)
Options....only invest with money that you are willing to loose, but gains can be easily be tenfold or more.
Safe options strategy. Buy both puts and calls on the same stock, and if it moves up sell the calls and let the puts expire. If the stock moves down sell the puts and let the calls expire. You only loose if the stock doesn't move up or down.
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timeasmymeasure
no subject
Date: 2005-03-10 05:20 pm (UTC)I guess in the order of investing, experience goes:
-Going long on a stock (regular buy of a stock)
-Going short on a stock (selling stock that you do not own, with promise to buy it back
-Buying call options (buying the option to buy a stock at a particular [strike] price. If the stock moves up, you can exercise or sell the option and make LOTS of money.)
-Buying put options (buying the option to sell a stock at a particular [strike] price. If the stock moves down, you can exercise or sell the option and make LOTS of money.)
Warnings - shorting if the stock moves up quickly can lead to great losses, so you have to watch it carefully OR you should set stop losses (on all your trades. Longs included. Technical Analysis can help you choose the appropriate stop loss)
Options....only invest with money that you are willing to loose, but gains can be easily be tenfold or more.
Safe options strategy. Buy both puts and calls on the same stock, and if it moves up sell the calls and let the puts expire. If the stock moves down sell the puts and let the calls expire. You only loose if the stock doesn't move up or down.