Ive saved up some capital and it looks like there will be alot of opportunities on the horizon but im uneducated on the process.Can any of you direct me to some info?
-Thanx in advance
-Thanx in advance
Info on Short Sales?
- Thread starter ^SpiderMan^
- Start date
I hope this helps a little..
some quick info about the process
http://en.wikipedia.org/wiki/Short_selling
"It is important to note that buying shares and then selling them (called "going long") has a very different risk profile from selling short. In the former case, losses are limited (the price can only go down to zero) but gains are unlimited (there is no limit on how high the price can go). In short selling, this is reversed, meaning the possible gains are limited (the stock can only go down to a price of zero), and the seller can lose more than the original value of the share, with no upper limit. For this reason, short selling is usually used as part of a hedge rather than as an investment in its own right.
Many short sellers place a "stop loss order" with their stockbroker after selling a stock short. This is an order to the brokerage to cover the position if the price of the stock should rise to a certain level, in order to limit the loss and avoid the problem of unlimited liability described above. In some cases, if the stock's price skyrockets, the stockbroker may decide to cover the short seller's position immediately and without his consent, in order to guarantee that the short seller will be able to make good on his debt of shares."
I don't have first hand experience with this as I haven't opened my trading account yet.
a snippet of E-Trade's policy toward's short selling
https://us.etrade.com/e/t/welcome/welstatic?gxml=financialcondition.html
10. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND CONCENTRATIONS OF CREDIT RISK
"The Company's customer securities activities are transacted on either a cash or margin basis. In margin transactions, the Company extends credit to the customer, subject to various regulatory and internal margin requirements, collateralized by cash and securities in the customer's account. As customers write option contracts or sell securities short, the Company may incur losses if the customers do not fulfill their obligations and the collateral in the customers' accounts is not sufficient to fully cover losses which customers may incur from these strategies. To control this risk, the Company monitors margin levels daily, and customers are required to deposit additional collateral, or reduce positions, when necessary.
The Company loans securities temporarily to other brokers in connection with its securities lending activities. The Company receives cash as collateral for the securities loaned. Increases in security prices may cause the market value of the securities loaned to exceed the amount of cash received as collateral. In the event the counterparty to these transactions does not return the loaned securities, the Company may be exposed to the risk of acquiring the securities at prevailing market prices in order to satisfy its customer obligations. The Company controls this risk by requiring credit approvals for counterparties, by monitoring the market value of securities loaned on a daily basis, and by requiring additional cash as collateral or returning collateral when necessary.
The Company borrows securities temporarily from other brokers in connection with its securities borrowing activities. The Company deposits cash as collateral for the securities borrowed. Decreases in security prices may cause the market value of the securities borrowed to fall below the amount of cash deposited as collateral. In the event the counterparty to these transactions does not return collateral, the Company may be exposed to the risk of selling the securities at prevailing market prices. The Company controls this risk by requiring credit approvals for counterparties, by monitoring the collateral values on a daily basis, and by depositing additional collateral with counterparties or receiving cash when deemed necessary."
E-Trade as well as other trading platforms take certain measures to ensure that a short-selling strategy does not adversely affect the individual or the company.
some quick info about the process
http://en.wikipedia.org/wiki/Short_selling
"It is important to note that buying shares and then selling them (called "going long") has a very different risk profile from selling short. In the former case, losses are limited (the price can only go down to zero) but gains are unlimited (there is no limit on how high the price can go). In short selling, this is reversed, meaning the possible gains are limited (the stock can only go down to a price of zero), and the seller can lose more than the original value of the share, with no upper limit. For this reason, short selling is usually used as part of a hedge rather than as an investment in its own right.
Many short sellers place a "stop loss order" with their stockbroker after selling a stock short. This is an order to the brokerage to cover the position if the price of the stock should rise to a certain level, in order to limit the loss and avoid the problem of unlimited liability described above. In some cases, if the stock's price skyrockets, the stockbroker may decide to cover the short seller's position immediately and without his consent, in order to guarantee that the short seller will be able to make good on his debt of shares."
I don't have first hand experience with this as I haven't opened my trading account yet.
a snippet of E-Trade's policy toward's short selling
https://us.etrade.com/e/t/welcome/welstatic?gxml=financialcondition.html
10. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND CONCENTRATIONS OF CREDIT RISK
"The Company's customer securities activities are transacted on either a cash or margin basis. In margin transactions, the Company extends credit to the customer, subject to various regulatory and internal margin requirements, collateralized by cash and securities in the customer's account. As customers write option contracts or sell securities short, the Company may incur losses if the customers do not fulfill their obligations and the collateral in the customers' accounts is not sufficient to fully cover losses which customers may incur from these strategies. To control this risk, the Company monitors margin levels daily, and customers are required to deposit additional collateral, or reduce positions, when necessary.
The Company loans securities temporarily to other brokers in connection with its securities lending activities. The Company receives cash as collateral for the securities loaned. Increases in security prices may cause the market value of the securities loaned to exceed the amount of cash received as collateral. In the event the counterparty to these transactions does not return the loaned securities, the Company may be exposed to the risk of acquiring the securities at prevailing market prices in order to satisfy its customer obligations. The Company controls this risk by requiring credit approvals for counterparties, by monitoring the market value of securities loaned on a daily basis, and by requiring additional cash as collateral or returning collateral when necessary.
The Company borrows securities temporarily from other brokers in connection with its securities borrowing activities. The Company deposits cash as collateral for the securities borrowed. Decreases in security prices may cause the market value of the securities borrowed to fall below the amount of cash deposited as collateral. In the event the counterparty to these transactions does not return collateral, the Company may be exposed to the risk of selling the securities at prevailing market prices. The Company controls this risk by requiring credit approvals for counterparties, by monitoring the collateral values on a daily basis, and by depositing additional collateral with counterparties or receiving cash when deemed necessary."
E-Trade as well as other trading platforms take certain measures to ensure that a short-selling strategy does not adversely affect the individual or the company.
If your just starting out I wouldn't recommend short selling. Like the person before said, gains are limited and losses aren't. Leave this for the big boys at the hedge funds. A study showed 97% of day traders who short sell lose over the long run.
Another thing you probably want to research is the rules around short selling. They put rules in place to prevent manipulation such as you have to short the stock on an uptick and you have to maintain a certain balance to keep the broker from forcing you to cover. Otherwise, any fool with a margin account could make money big money during a market correction or crash.
Another reason I don't like short selling is if a stock falls too much the exchange will suspend trading on that stock. So basically a stock is not going to drop and give you a huge return in one day. If you have the time to watch the market all day then you COULD make good money shorting, but the risk is too high for payout in my opinion. Besides, watching a stock every second takes the enjoyment out of investing. It's more like being at a crap table at that point.
Another thing you probably want to research is the rules around short selling. They put rules in place to prevent manipulation such as you have to short the stock on an uptick and you have to maintain a certain balance to keep the broker from forcing you to cover. Otherwise, any fool with a margin account could make money big money during a market correction or crash.
Another reason I don't like short selling is if a stock falls too much the exchange will suspend trading on that stock. So basically a stock is not going to drop and give you a huge return in one day. If you have the time to watch the market all day then you COULD make good money shorting, but the risk is too high for payout in my opinion. Besides, watching a stock every second takes the enjoyment out of investing. It's more like being at a crap table at that point.
acm21
Banned
I agree with the last msg posted. Shorting selling, options, and futures are for the pros or sophisticated investors. Maybe you should research a good financial advisor or think about putting your money in a mutual fund or ETF (Exchange Traded Fund). It acts like a mutual fund but trades like a stock. If you want to invest on your own you will have to read up on investing (Wall street journal, Barrons, etc). The library will probably have some good books and they are free! Also you can use sites like "Scottrade, fidelity, Charles Schwab, Gorillatrades, etc if you want to invest on your own.
Also start watching "CNBC" which is the business channel. They have Jim Cramer, the "Fast Money Guys," and "Squawk Box."
Alot of people invest on their own but they put the necessary work into it. Those guys that people see making millions of dollars have a passion for it. And you have to be willing to lose money and not let it affect you. It's almost like gambling.
Also start watching "CNBC" which is the business channel. They have Jim Cramer, the "Fast Money Guys," and "Squawk Box."
Alot of people invest on their own but they put the necessary work into it. Those guys that people see making millions of dollars have a passion for it. And you have to be willing to lose money and not let it affect you. It's almost like gambling.
acm21 said:
And Gambling is a bad thing? the problem is Cramer and CNBC all tell you what is hot but no one is quick to tell you when to sell. Plus a lot of the time before they mention a stock on the air they either have their position or have liquidated the position before commenting.
acm21
Banned
Grambling is fun but just be prepared to lose everything. That was my point. I wouldn't listen to him for investment advice but you can learn from what he knows. If you keep up with CNBC and the business journals they will make you more knowledgeable will you make investment decisions. Cramer and the other people know what to recommend and buy b/c they understand the financial markets better than other people. For example, they have been talking about ethanol on CNBC and the WSJ for more than a year now but no one really jumped into it. Corn "bushels" futures have almost doubled since the ethanol thing has picked up.
Bush required those oil companies to have a certain amount of ethanol when making gasoline to make it for more environmentally friendly. That could've been a buying opportunity for someone if you knew about it. That's another reason gas was going up last summer but the average person wouldn't know this. Not to mention the other things such as middle east tensions, the hurricane season, oil & gas reserves, demand from other countries, etc.
Also ethanol is going to make other things go up b/c corn is used to feed cattle and chickens. And it's used in soda or pop to make high fructose corn syrup so you can probably expect food prices to go up soon. Since the farmers are planting more corn then they are also cutting back on other crops so they are going to go up. Also meat is going to cost more b/c it's going to cost more to feed them b/c more corn is going towards making ethanol. If you watch the "Fast Money Guys," Eric Bolling had been telling people that there is going to be a water shortage soon but most people aren't listening b/c they don't see it now. But he's referring to some years down the road.
Bush required those oil companies to have a certain amount of ethanol when making gasoline to make it for more environmentally friendly. That could've been a buying opportunity for someone if you knew about it. That's another reason gas was going up last summer but the average person wouldn't know this. Not to mention the other things such as middle east tensions, the hurricane season, oil & gas reserves, demand from other countries, etc.
Also ethanol is going to make other things go up b/c corn is used to feed cattle and chickens. And it's used in soda or pop to make high fructose corn syrup so you can probably expect food prices to go up soon. Since the farmers are planting more corn then they are also cutting back on other crops so they are going to go up. Also meat is going to cost more b/c it's going to cost more to feed them b/c more corn is going towards making ethanol. If you watch the "Fast Money Guys," Eric Bolling had been telling people that there is going to be a water shortage soon but most people aren't listening b/c they don't see it now. But he's referring to some years down the road.
Hey man your question is a bit general. Its really too broad for me to be really specific on the answer.
Shorting is good. Shorting is a beautiful thing. Shorting can be one of the quickest way to make and lose your money. There are some people who sit around looking for opportunities to short. IE a company reports horrible numbers makes perfect shorting opportunities. Get in make a couple bucks get out. To do it successfully you need to have enough money for a margin account. It helps to have more than $25k. You don't need $25k since most brokerage margin account minimum starts @ $5k.
At this point if you have not yet opened a brokerage account there is no point in me talking any further. Read the brokerage policies and tutorial on shorting.
Shorting is good. Shorting is a beautiful thing. Shorting can be one of the quickest way to make and lose your money. There are some people who sit around looking for opportunities to short. IE a company reports horrible numbers makes perfect shorting opportunities. Get in make a couple bucks get out. To do it successfully you need to have enough money for a margin account. It helps to have more than $25k. You don't need $25k since most brokerage margin account minimum starts @ $5k.
At this point if you have not yet opened a brokerage account there is no point in me talking any further. Read the brokerage policies and tutorial on shorting.
Maybe he's talking about Real Estate short sales?
I think he's talking about real estate too. The process is pretty basic. All you need is an authorization to talk to the mortgage company from homeowner, and an appraisal or Brokers Price Opinion. You'll learn by trial and error by calling the mortgage company and negotiating. You would be surprised at how willing that they are to work with you. You have to talk with the Loss Mitigation department or Forecloser department. They won't talk to you unless you have the borrowers authorization on file first.
deputy dawg said:
ah yes i believe you are correct. The question was a bit vague and i misread it. In any case mrjones laid out the scenario for you to follow through with it also helps to have financing arranged to mitigate the purchase. The foreclosure rate is alarming and will create good investment opportunities but before you do anything get an inspection on those properties there is nothing worse than an "unexpected cost" eating into your profit margin.
D
dannyroman
Guest
Never Herd Of Real Estate Shorting, What Is This? Thx
The Basics of “Short Sales”
by William Bronchick
You will likely come across dozens of properties in foreclosure with little or no equity, that is, the seller owes at close to or more than the property is worth. In these situations, lenders are sometimes willing to accept less than the full amount due, commonly referred to a "short pay" or "short sale."
Negotiating a short sale with the lender is a difficult process, generally because it is a daunting task finding a bank officer who has the authority to accept a discount. You will have to call around to locate the lender’s “Loss Mitigation Department.” More than likely, each lender you deal with will have a separate name for this department, so be patient when calling. Much like getting your phone bill corrected, you can expect the process to involve a lot of waiting on hold and being bounced around an intricate maze of automated voice mail systems. Once you get in touch with the right person, then the negotiating begins.
From the lender’s perspective, a short sale saves many of the costs associated with the foreclosure process - attorney fee's, the eviction process, delays from borrower bankruptcy, damage to the property, costs associated with resale, etc. In a short sale scenario, the lender gets the property back faster, so it is able to cut its losses. Your job as the investor is to convince the lender that it will fare better by accepting less money now.
Here's the website that this is coming from
http://www.totalrealestatesolutions.com/articles/disp.cfm?aid=220&typeid=1
by William Bronchick
You will likely come across dozens of properties in foreclosure with little or no equity, that is, the seller owes at close to or more than the property is worth. In these situations, lenders are sometimes willing to accept less than the full amount due, commonly referred to a "short pay" or "short sale."
Negotiating a short sale with the lender is a difficult process, generally because it is a daunting task finding a bank officer who has the authority to accept a discount. You will have to call around to locate the lender’s “Loss Mitigation Department.” More than likely, each lender you deal with will have a separate name for this department, so be patient when calling. Much like getting your phone bill corrected, you can expect the process to involve a lot of waiting on hold and being bounced around an intricate maze of automated voice mail systems. Once you get in touch with the right person, then the negotiating begins.
From the lender’s perspective, a short sale saves many of the costs associated with the foreclosure process - attorney fee's, the eviction process, delays from borrower bankruptcy, damage to the property, costs associated with resale, etc. In a short sale scenario, the lender gets the property back faster, so it is able to cut its losses. Your job as the investor is to convince the lender that it will fare better by accepting less money now.
Here's the website that this is coming from
http://www.totalrealestatesolutions.com/articles/disp.cfm?aid=220&typeid=1
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