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Monday, November 20, 2006 11:01:02 PM
A short is when you have borrowed 100 stocks from your broker, for a small fee. Sell them on the market, hope the price goes down and buy them back from the market and return them to the broker....keeping the price difference between the two.
Buying in is when the stock does not go down but go up. The shorter has to quickly buy the stock to give back to the broker. Paying much more than the stock was when he first borrowed them from the broker.
It is called a buy-in for shorts or naked shorts, (when you dont even borrow stocks you just sell air), and in the big world of the Nasdaq it is called a margin call. Because there is a margin call, (when you first borrow the stocks you are allowed to only have a percentage of their actual value in your cash account...it is called buying on margin...when the stock goes up....not down....you are in trouble and no longer have enough money in your account....so you have to put some in...called a margin call)...hope that helps.
Incidently you cannot short pennystocks for cheap....that borrow plus a "percentage" is absolutley HUGE.....only place is a firm in Canada that will do it.
But you see the problem: You could ending up owing more money than you actually have. Then you have to sell stuff, like your car your house. etc.
Invest in yourself first and the rest will follow. The universe is ultimate hedge fund.
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