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Short and Sweet
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freshman
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22-Mar-2007 11:00
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keen to know this shorting strategy, please advise. Thks |
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catch22
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22-Mar-2007 10:54
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What do you mean by shorting strategy? |
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wealth$
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22-Mar-2007 10:27
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if u have a shorting strategy, u will be have > 50% win, eg, 1 day reversal signal. |
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firstlady
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22-Mar-2007 10:22
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take my advice...dont short...the odds are against u. |
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nickyng
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22-Mar-2007 10:18
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no harm shorting small lah...of course u win small oso loh :) |
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sohguanh
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22-Mar-2007 10:12
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Shorting is gambling of cuz but if it can make lotsa monies why not? Nickyng is a shortist follower and I wish him all the luck. I sincerely hope at the end of the year his total winnings and losses should be positive :) |
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tanglinboy
Elite |
22-Mar-2007 10:05
Yells: "hello!" |
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Shorting is very dangerous... so much can happen in 1 day and if you short in the morning, you're literally gambling because you need to cover at end of the day! |
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sohguanh
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22-Mar-2007 09:30
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According to nickyng for it's brokerage firm internet system he just perform as usual sell and buy for shorting. As for Contra, the system has a checkbox to tell the system you are doing a contra sell. Even if you did not check it the system is still able to tell that it is a contra trade. The checkbox is just to faciliate but not mandatory as I was told. You need ask nickyng which brokerage firm system he is using. |
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LigerToo
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21-Mar-2007 23:29
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Let me clarify. i have not own the shares when i short, and will not pay for it after i bought them cos i have already sold them off when i short. This is like contra in reverse. Hence when i short, should i indicate the sale to the system as a 'contra' sale or as an normal sale. |
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sohguanh
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21-Mar-2007 12:50
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Some minor distinction. Short sell is queue to sell shares you DID NOT OWN. Contra is buy in already but not yet made payment you sell out. So LigerToo for you is shares buy in already or not? If yes then sell out before payment date is contra sell. |
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LigerToo
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21-Mar-2007 12:47
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hence if I were to sell short, do I sell it as contra since I have not "paid" for the shares yet? |
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alpha23
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21-Mar-2007 12:14
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yes, thats contra le.. rite? |
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terencefok
Master |
21-Mar-2007 11:11
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so based on the 3-day delivery rule, if i buy a stock today, can i sell it tomorrow without having to pay for it? |
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mickey57
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21-Mar-2007 11:05
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thks, now i have better understanding of shorting. |
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tanglinboy
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21-Mar-2007 11:01
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Good post! Thanks! |
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lg_6273
Elite |
21-Mar-2007 00:22
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Short and sweet DANIEL BUENAS examines the gains - and pitfalls - of selling a stock short Published March 19, 2007 FINANCIAL markets around the world had it rough over the last few weeks, and Singapore was not spared either. A term that is perhaps bandied around a little more during market dips is selling a stock short - otherwise known as 'shorting', or taking a short position. For those unfamiliar with the term, shorting is actually a relatively simple concept: it is about selling shares that you don't actually own - yet. Imagine company A has a share price of $10 per share. However, an investor (let's call him Tommy), believes that the company is overvalued, or feels that world events - such as a sharp fall in global markets - will cause the share price to fall. Since Tommy doesn't own any shares in company A, what he decides to do is to 'short' the shares, or sell the shares first - even though he doesn't own any. Let's assume he sells 100 shares for $1,000. Now, let's say company A's stock comes crashing down from $10 a share to $5 a share. At this point, Tommy buys back 100 shares - for a total cost of $500, and then passes the 100 shares to the person who originally bought the shares he didn't have. In essence, Tommy sold the shares at $1,000, but bought them back for $500, which leaves him a tidy profit of $500. This basically reworks the conventional wisdom of stock investment that says 'buy low, sell high', into 'sell high, buy low', and is one reason why some investors can still turn a profit when markets tumble. But let's take a look at a different scenario. Let's say that just after Tommy shorted company A's shares, it announces that it has found a drug that can potentially cure cancer. Investors are thrown into a frenzy, and before you know it, its share price has soared to $50. Ouch. Before the share climbs any further, Tommy decides to cut his losses and closes out the transaction. In this case, he bought the shares back at 1,000 x $50, or $5,000, which means he makes a loss of $4,000. If you think about it objectively, in the traditional 'buy low, sell high' scenario, the potential downside loss is limited by the share price. That is to say, shares can never fall below zero in value and thus, your losses are limited to your invested capital. However, there is technically no limit to how high a share price can rise, so your potential profit is, in theory, limitless. But the converse holds true for short selling - your profit, since it is now dependent on the fall in share price, is limited, although your potential loss is now technically limitless. Of course, that is only in theory. In reality, a stock's share price does not rise to infinity, nor do shares commonly fall to zero. The example above is simplistic and illustrates the concept behind short selling. In practice, the Singapore Exchange (SGX) works on a three-day delivery period, which means that shares bought will have to be paid for three days after the purchase date. When someone on the SGX short sells a share through his broker, he has three days to 'deliver' the shares to the buyer. However, because of this three-day delivery system, it means that the short seller will only be able to 'cover' his short sale if he buys the shares (referred to in industry parlance as 'buying-in' the shares) on the same day. For example, if Tommy short sells 100 company A shares to James on Monday, he has to buy back the shares on the same day in order to deliver the shares to James on Thursday. But that does not mean that Tommy absolutely must buy-in on Monday though. He has two other options: DON'T BUY-IN, BORROW If Tommy doesn't buy-in the shares on Monday, the SGX has a facility where a short seller has until Thursday to 'borrow' the shares from another investor or institution who already owns the shares, for a fee. In this way, the shares will be delivered to James by Thursday, and James now owes someone else 100 shares of company A. James now can choose to repay the shares at a future time. AUTOMATIC BUY-IN However, if Tommy is unable to find a lender, the SGX - acting on behalf of Tommy - will buy the 100 shares off a 'buy-in' market (a separate market from the main board and Sesdaq). The price at which the shares are bought-in is determined by a number of factors, but it is higher than the share's price on the main board or Sesdaq. The shares will then be delivered to James. The point to note here is that Tommy would not have any control over what price the shares are bought-in. Both these options add additional risk. Even if Tommy manages to borrow the shares, the fall in share price has to offset the fee paid to the lender in order for Tommy to turn a profit. And if he is unable to find a lender, then the SGX will automatically settle his transaction, buying shares at a price point that Tommy cannot decide on. The bottom line is that short-selling is a trading technique that institutions and retail investors can use to make money even when markets are falling. However, it is risky so investors should consider their options carefully before deciding to short sell. |
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