nice shorting expl.
moneybuilder102
Share
Wednesday, January 26, 2011 7:29:29 PM
Re: goofball post# 29666 Post # of 29669
When a stock is shorted, it means that whoever is shorting is selling shares that they do not own (they could be borrowing from their broker or someone else though).
The best way to explain this is in an example.
If you shorted 100,000 shares of SKGO today at .0012, you sold 100,000 shares to someone who was trying to buy them, but you never owned that 100,000 shares. You borrowed those shares from a market maker or your broker, or they are naked shorted (we will keep this one out of the mix).
Now, since you sold someone those 100,000 shares, that transaction was worth $120.00 (100,000 shares x .0012).
Now, what you have to do is "cover your short". This means you have to buy back those shares to replace those that you borrowed from someone else. The only way you can make money doing this is if you can buy back those 100,000 shares cheaper than you sold them. say you were able to buy back 100,000 shares today at .0008, that means it cost you $80 (100,000 x .0008).
So $120-$80=$40 profit for you.
If you shorted 100,000 shares at .0012 ($120), and the stock ran to .005 and you covered your 100,000 shares at .005, that would cost you $500.
So $120-500= -$380.
Essentially, when you short, you think a stock will go down, almost all brokers do not allow shorting for penny stocks under $3 or $5 per share.
Market Makers short penny stocks to kill them and to cause people to dump their shares so they can buy back the shares that people dump at a lower price. I bet that market makers made thousands today on SKGO.
Market makers (MM's) shorted 40 million shares of SKGO today (my guess is mostly at .001-.0012), and they caused people to dump down to .0008, so what they will do now is buy back these shares for cheaper than they sold them for and make a nice profit on it. When they buy back their shares, it will cause the stock to go higher.
This is one of the many reasons why I think SKGO will continue climbing.
Mb102
