Trying to understand the thinking of the shorts. B
Post# of 155532
(Total Views: 579)
Posted On: 06/06/2025 2:00:51 PM
Trying to understand the thinking of the shorts. By the way, I’ve never shorted. I’ve done puts and calls on large market cap stocks, but I would never short a stock. A couple of years ago, I was accused of being a basher on this board, but that’s another story.
Anyway, trying to understand the mind of a short. Let’s say you decide to short CYDY buy selling 10,000 shares at .35. Ignoring commissions and interest, you temporarily net $3,500. Let’s say the share price drops .02 (hardly moves more than that) and you buy back at .33. You net $200 (3,500-3,300) for your efforts. Whoopie!
Let’s say you decide to wait for a lower price to max your profit. What is the max you can net from this transaction? If the company goes bankrupt (very unlikely), you net the $3,500. But let’s say the company goes in the other direction and announces a partnership. Very likely the share price could jump to $2. As quick as that, you are in the hook for $16,500 (20,000-3,500). Maybe you decide to wait it out rather than take a loss at that time. Let’s say the series of news leads to a $20 buy out (ER’s minimum acceptable price). Now you are in the hole for $196,500 (200,000-3,500). Hope you are prepared for that margin call from your broker.
Anyway, trying to understand the mind of a short. Let’s say you decide to short CYDY buy selling 10,000 shares at .35. Ignoring commissions and interest, you temporarily net $3,500. Let’s say the share price drops .02 (hardly moves more than that) and you buy back at .33. You net $200 (3,500-3,300) for your efforts. Whoopie!
Let’s say you decide to wait for a lower price to max your profit. What is the max you can net from this transaction? If the company goes bankrupt (very unlikely), you net the $3,500. But let’s say the company goes in the other direction and announces a partnership. Very likely the share price could jump to $2. As quick as that, you are in the hook for $16,500 (20,000-3,500). Maybe you decide to wait it out rather than take a loss at that time. Let’s say the series of news leads to a $20 buy out (ER’s minimum acceptable price). Now you are in the hole for $196,500 (200,000-3,500). Hope you are prepared for that margin call from your broker.
(13)
(0)