8ball
As seen on TikTok
Imperfect information.
Short-selling is a conduit for updated information to make it in, with short-term profit being the carrot.
Govt bans 'short selling'
- Thread starter Dan U
- Start date
Imperfect information.
Short-selling is a conduit for updated information to make it in, with short-term profit being the carrot.
littlebabyjesus
one of Maxwell's demons
I still don't get it. Where does the extra information come from?
And who are the suckers who are buying high and selling low?
And who are the suckers who are buying high and selling low?
8ball
As seen on TikTok
From the person doing the short-selling, basically.
They are betting that the market is overvaluing whichever stock/derivative that they are shorting. If they are wrong the short gets bought and they never make their money back.
The weakness is that shorts can leads to runs, where the price plummets and everyone starts short-selling on the basis of the shorts of others. A spiral of fear, basically, much like the spiral of greed that has massively inflated house prices in the last decade, but in reverse.
Often from insider trading. The City of London is like a sieve.
butchersapron
Bring back hanging
Massive hedge funds cannot affect share price either. Esp on...
danny la rouge
Ninja swords for all disabled people
What?
Short-selling is selling something you don't have. Why is that OK for shares but not houses?
Can I short sell your house to make a quick buck? There's a falling property market. Your house might be overvalued.
butchersapron
Bring back hanging
Try naked short selling.
8ball
As seen on TikTok
You'd short sell a hypothetical house.
Then buy a house back to balance the books once prices drop.
I don't think you realise the serious implications this has for the City. (And by extension the UK economy).
The ability to sell short is a key tool for the trader - apart from anything else it is necessary for effective hedging. So without this ability do you think capital is more likely to continue trading in the city, or go to a more friendly environment?
danny la rouge
Ninja swords for all disabled people
On an actual street, though.
david dissadent
New Member
Its a bit like swatting mosquitos while elephants are stomping over the village.
littlebabyjesus
one of Maxwell's demons
Explain.
And while you're at it, can you explain where the wealth that hedging creates comes from?
8ball
As seen on TikTok
But back when it was all fields . . .
david dissadent
New Member
Or like buying a house with money you havent earnt yet.
littlebabyjesus
one of Maxwell's demons
You're selling the idea that someone might apply for planning permission.
butchersapron
Bring back hanging
Oh i do. I do realise what this means for the trader and their abilty to move their portfolio. And you know what? I couldn't give a fuck.
The cry of 'capital flight' when you pretend to have anything to do with anarchism. Don't stop me doing anything ever
danny la rouge
Ninja swords for all disabled people
butchersapron
Bring back hanging
(((((the trader)))))
littlebabyjesus
one of Maxwell's demons
Sorry, I still don't understand.
If the buyer knows the seller is short selling, why do they buy?
If the buyer knows the seller is short selling, why do they buy?
A pension fund for example will contain long and short positions to hedge against the market going excessively in one direction or the other. The initial funds of course come from those who pay into the fund.
butchersapron
Bring back hanging
The price is already agreed.
butchersapron
Bring back hanging
littlebabyjesus
one of Maxwell's demons
What do you mean? Does the buyer not know the seller is short selling?
8ball
As seen on TikTok
It may be the case that one person thinks a given price is about to go up where the other thinks it is about to go down.
A bit like horseracing and a couple of punters disagreeing on how much difference it makes that the horse just took a big dump.
Kinda.
Ish.
butchersapron
Bring back hanging
They might. (i've got confused over which 'buyer' we mean to be honest)
littlebabyjesus
one of Maxwell's demons
ok, can I relate this to a bookie who lays off a large bet by buying bets from other bookies? Whichever horse wins, the bookie aims to come out on top.
Great sentiments there butchers. The city being a core part of the UK economy, and you "couldn't give a fuck" that it's failure could force us into penury?
Get over yourself.
Our economy is hopelessly dependent on preventing such capital flight. It's a desperate thing for you to do to link my highlighting this problem to any particular political position. If Tony Benn pointed this exact same thing out would that immediately exclude him from the socialist club? No.
mysterygirl
Stealth visit from work
elbows
Well-Known Member
Well at least by banning it they wont be able to blame short-selling if things carry on being rather turbulent in the coming months. Not that they are trying to suggest that short-selling is the entire cause of all our woes right now. At the very least it probably exascurbates the current turmoil so it will be interesting to see if things are much different without its influence.
Might also be interesting to see if any entities suffer directly as a result of the ban, ie those who have used short-selling to profit till now.
Might also be interesting to see if any entities suffer directly as a result of the ban, ie those who have used short-selling to profit till now.
littlebabyjesus
one of Maxwell's demons
In this case, I'm talking about the initial sell, so the short-seller needs to find a buyer at the high price. But the buyer...
OK, I'm getting it a bit, I think. This is essentially a transfer of money from one trader to another as traders try to balance their risk, a bit like bookies do.
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