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Short selling guide

Discussion in 'Fred's House of Pancakes' started by bwilson4web, Mar 27, 2024.

  1. bwilson4web

    bwilson4web BMW i3 and Model 3

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    Source: https://personal1.vanguard.com/pdf/margin.pdf

    upload_2024-3-27_4-21-13.png
    . . .

    Now if I can just find a stock that is headed down the toilet. Perhaps a recent SPAC with a company that continues to lose money. Looking for something talked up by a known, pathological liar. Wonder what that might be?

    Bob Wilson
     
  2. ETC(SS)

    ETC(SS) The OTHER One Percenter.....

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    TSLA shorters took it in the shorts back in the day.....but TSLA does manufacture an actual product.

    Down in the 17-and-under portion of this forum I mentioned a certain stock that is being carefully watched by TDS sufferers as being in my retirement portfolio below lottery tickets and above illicit hemp farming.

    Good Luck!
     
  3. bwilson4web

    bwilson4web BMW i3 and Model 3

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    Never having short sold a stock before, I'm starting with just 10 shares at Market against my 13.5% margin account. If it goes down faster than 13.5% (annual rate, daily calculated,) I should make a nice profit when I step out of it.
    . . .
    upload_2024-3-27_7-46-55.png
    . . .

    At the craps table, I play both PASS/COME and DONT PASS/DONT COME. This is the first time I've played the stock market DONT side. So I'll wait 30, 60, 90, or 180 days to see how it goes.

    Bob Wilson
     

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  4. ETC(SS)

    ETC(SS) The OTHER One Percenter.....

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    EVEN if the stock performs like TSLA you will probably do OK.
    BOTH more and less so since you don't have very many chips on the table.

    The 223 day performance will be interesting.....
     
  5. PriusCamper

    PriusCamper Senior Member

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    upload_2024-3-27_13-24-40.png
     
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  6. fuzzy1

    fuzzy1 Senior Member

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    I hadn't yet seen this thread when I replied to the other thread.

    Beware of the risks from a short squeeze. Even for a stock that is destined to be flushed down the toilet in the long term, you can still get crushed by a squeeze in the short term. By crushed, I don't mean losing just your 'investment' itself, but much more than you actually put in. That Wikipedia article mentions one stock price that rose 10,000% in five days during a short squeeze.
    NB: Don't miss this page of that same Vanguard guide [emphasis added]:

    "Short sales

    A “short sale” is a transaction in which you sell a security you don’t own by borrowing the security. Short sales are made in anticipation of a decline in the price of the security, which enables you to cover the sale with a future purchase at a lower price and therefore a profit. You must be approved for margin investing to engage in short selling.

    If the shares of the security that you sold short are no longer available to borrow through Vanguard, your account will be subject to a mandatory “buy in” at current market prices for all or part of your short positions. Because the price of the stock could rise indefinitely, short sales are said to have “unlimited liability” and should only be entered into if you fully understand the risks and potentially adverse impact such trades might have on your portfolio. ..."

    = = = = = = = =

    Related news items:

    Trump's Truth Social costliest US stock to bet against

    Trump Media Is Now the Most Expensive US Stock to Bet Against - Bloomberg

    Trump Media Pop Is Giving DJT Stock Short Sellers a Run for Their Money | InvestorPlace

    Huuuge Short Losses in DJT- DWAC Rally
     
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  7. bwilson4web

    bwilson4web BMW i3 and Model 3

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    True that. When my losses equals the amount invested, I'll take my 'bitter' bath. But betting on Trump:
    • Wildly successful
    • Wildly failures
    I like my cautious approach. The only other sure fire 'short' would be hydrogen fuel cell vehicles. If I do OK with DJT, the fool-cell stocks are next.

    Bob Wilson
     
  8. ETC(SS)

    ETC(SS) The OTHER One Percenter.....

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    That's why they call it the 'street.
    Start playing there before you're old enough, and you're apt to get crushed.
    I do not thing that friend Bob will be eating Ramen and availing himself of public transit even if he loses his initial investment.
     
  9. fuzzy1

    fuzzy1 Senior Member

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    That's the thing with short selling: the potential loss is not limited to just the initial investment. It can be far higher.

    Though I am seeing that the financial houses that handle these products for retail customers, normally forcibly and involuntarily close the customer's position before the loss consumes the entire margin account in which it is held. So as long as Bob's margin account is stocked with only play money, not rent / mortgage / food money, then he'll survive most any unfavorable timing on this item.

    I believe some of the more infamous short squeezes, involved cases where the squeezers had some control to narrow the fire exits, significantly delaying the squeezees rushing for the exits and increasing their financial pain. The wikipedia article evens mentions one case where the squeezer owned the entire float, so squeezees could not exit without personally calling him to negotiate their exit. Though in this case, DJT holds only 60% of DJT, so that angle isn't such a risk here.
     
  10. ChapmanF

    ChapmanF Senior Member

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    I seem to remember something like that in The First Tycoon, the biography of Cornelius Vanderbilt by T. J. Stiles. But I haven't found it again in a quick look, so the details may have been different.

    I think I've read that about 12% of DJT stock is held by investors going short. So 60% is held by DJT, and the fire exits are at most 28% wide, depending on the intentions and disposition of whoever holds those 28%.

    I wonder, in cases where the fire exits are narrow enough, what even the financial house can do to accomplish that.
     
  11. fuzzy1

    fuzzy1 Senior Member

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    A quick online search reminds that Vanderbilt was heavily involved in such actions and other market manipulations over a long period. He was one of the originals.

    I read the same. Pre-IPO, it was the most strongly shorted SPAC, though some other regular stocks are much more strongly shorted.

    When it gets bad enough, I believe they get caught too, so they may be restrictive in who they allow to play, and somewhat trigger happy at preemptively protecting themselves from overhanging customers.

    Yesterday's news links also indicated that borrowing costs being charged for shorting this issue were also extremely high compared to other issues. Collect lots of fees as buffers against future risk.

    Lacking any special skills or tools or insight to compete against the big boys in their zero-sum games (actually a bit negative-sum after trading fees), I don't play any of these derivative markets, but just make use of the fact that a rising tide lifts (almost) all boats. Thankfully, mom seeded this more than a half century ago, very carefully shepherding her widow's life insurance payouts and maintaining a reasonably frugal lifestyle for a long time. This gave me and my siblings enough critical mass to hold our interest and keep building upon it as soon as we had our own paychecks.

    If DJT had done the same by putting his inheritance into an S&P 500 index and controlled his profligate lifestyle, he'd be far wealthier now. Even without any dividend reinvestment. Even without any of the huge paychecks he drew from The Apprentice and other ventures.
     
  12. ETC(SS)

    ETC(SS) The OTHER One Percenter.....

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    I like to go back a few years and read all of the pejoratives that were hurled at the TSLA shorters.....

    Tickles my irony bone.
     
  13. bwilson4web

    bwilson4web BMW i3 and Model 3

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    Second attempt to 'short' DJT stock revealed there is no stock to borrow, at least with my broker, Vanguard. Next step is to find a brokerage that has DJT stock and see what terms are to 'short sell.'

    Bob Wilson
     
  14. fuzzy1

    fuzzy1 Senior Member

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    I'm seeing that TSLA short sellers lost about $40 Billion in 2020, gained about $16B in 2022, lost just over $12B in 2023. Not yet seeing a 2021 figure.

    Good for them. As a meme stock, driven and manipulated by huge amounts of politically motivated money, both shallow and deep pockets, this carries a lot of non-market risk that could spill over to other operations.

    And if, per chance, DJT 'wins' the next election, the short-squeeze blood-letting could be severe as supporters and influence seekers bid up prices, buying shares to curry favor from their cult leader. Just because this will almost certainly collapse, eventually, doesn't mean it will do so on a schedule that detractors want or need. The heavy politics could make it an extremely wild ride before then, with many 'investors' from all sides getting thrown off the rollercoaster along the way.
     
  15. bwilson4web

    bwilson4web BMW i3 and Model 3

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    Turns out there is over a 200% fee to short DJT. If I understand correctly, I have to pay a fee for 2 shares to short 1. Uh, no since the demand for short shares exceeds the available to borrow.

    But there is another stock available that enthusiastically sells hydrogen fuel cell vehicles and is rather reluctant about BEVs. Very affordable, I'll experiment with "short sell" a small amount. Sad to say, too late for Fisker but there are others.

    Bob Wilson
     
  16. TMR-JWAP

    TMR-JWAP Senior Member

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    Trying to make a few hundred bucks on DJT when you could have traded a little TSLA when it skyrocketed for no reason a while back and had a suitcase of cash.....a few times

    Stepping over a dollar to pick up a dime.........funny how the world can be sometimes....
     
  17. fuzzy1

    fuzzy1 Senior Member

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    The cost must be rising. When I posted news links back at reply #6, the fee was 'just' an annualized 157%.

    Demand for shorts exceeding supply, is part of the recipe for short squeezes and other market manipulations.

    This is a 'meme' stock. Both those buying it, and those shorting it, are doing so for political advocacy and other non-financial reasons.
     
  18. ETC(SS)

    ETC(SS) The OTHER One Percenter.....

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    There are much worse ways to raise funds for the election......


    ....like a VERY unflattering $100,000 per person 'stare-and compare' with two much younger predecessors! :eek:
     
  19. bwilson4web

    bwilson4web BMW i3 and Model 3

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    About raising $26 m for the Biden campaign, my understanding:

    Tickets sold for as low as $225.

    More money got donors more intimate time with the presidents. A photo with all three was $100,000. A donation of $250,000 earned donors access to one reception, and $500,000 got them into an even more exclusive gathering.

    As for investment performance, obviously I'm going broke:
    upload_2024-3-30_1-32-10.png

    Worse, I'm old enough to be unemployable, 74. So I eat beans and franks (*) on:
    • ~$1,000 / mo - pensions
    • ~$3,000 / mo - Social Security (thanks all FICA payers)
    • %80 discount on Medicare A and B procedures at their already low rates
    I'm so poor I have to do my own 2019 Tesla maintenance so I can pay $2.50 / 100 miles. Last year, I had to buy a $15,000 used BMW i3-REx as my city and backup car when working on my Tesla. Tools are expensive, so I had to buy a $4, 18 mm deep socket and $45 suspension spring compression tool.

    Bob Wilson

    * - Black beans slow cooked with pan fried, smoked sausage, franks, and jalapeño pepper.
     

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    #19 bwilson4web, Mar 30, 2024
    Last edited: Mar 30, 2024
  20. ETC(SS)

    ETC(SS) The OTHER One Percenter.....

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    I'm EMPLOYED and I eat beans and franks too, though more rarely these days.
    GOOD stuff, if done properly.
    I'm needing to get more exercise and lean away from the carbs and cholesterol but I'm still med-free.
    My understanding is that his unworthy competition raised even more getting people to buy stock in a company that has about as much of a chance of being profitable as a government housing project.
     
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