How Short Selling Works
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- Опубликовано: 11 июл 2019
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Short selling lets investors bet against a stock, profiting when it falls in price, but how exactly does a short work? We'll discuss the process and the risks it entails in today's video!
Intro/Outro Music: www.bensound.com/royalty-free...
DISCLAIMER:
This channel is for education purposes only and is not affiliated with any financial institution. Richard Coffin is not registered to provide investment advice and as such does not provide recommendations on The Plain Bagel - those looking for investment advice should seek out a registered professional. Richard is not responsible for investment actions taken by viewers.
What are some companies you've thought about shorting? Knowing the risks, would you go through with it? Let me know!
The Plain Bagel Co. Lol
@@RicardoVladimirWong you shut your mouth
I was watching some of the REIT companies.
@@simonchau8675 you'd have to pay the dividends as mentioned though
@@danjowithbanjo oh I know I was just wondering about them cause there seems to be more and more vacancies I'm noticing in the Canadian cities
I should start shorting because every stock i pick goes down.
I should go long because every stock i short goes up
Bogdanoff won't be happy
I know it's a joke but you should just buy index funds
@@kylenetherwood8734 that's the second time i heard that. I have an ira so maybe i put it all in an index.
@@kylenetherwood8734 I'm not an expert by any means, but is it possible that index funds are also a bubble? I mean, I keep hearing people say that it will definitely go up, and you won't lose money there, which for me, is kinda alarming
Headcount: who's here after $GME??
Gotta educate my smooth brain to get that first wrinkle
Same
Eventually, it's going to come back to earth!
Me after missing out :( next time tho. Maybe on BB
@@Jumpingjackflash123 That's what I'm betting on. Lots of folks with lots of money. I expect all the popular WSB stocks to jump. Just hoping BB will be the biggest.
You could lose an infinite amount of money THEORETICALLY. Looks like the guys at reddit are really testing that theory.
LMFAOO
They aren’t the one testing it. The hedge farms are.
If we had infinite amounts of money to lose, why would we bother investing? Seems like a lot of extra work. It certainly would cut into the time I'd have to spend it.
@@thedalillama I don’t know talk to the farms that lost 20 billion in an attempt to make GameStop fail faster.
@@TNTITAN
How does shorting a stock make a business fail. I keep reading that, but it wasn't explained in the video. Sounds like you know.
2008 : The Big Short
2021 : The MEME Short
More like the GMEME short
POV you're here because of GME and wallstreet bets
Damn skippy. I'm too stupid to read it. I've gotta watch a video 10 times to get half of it.
😂😂😂😂
Anyone got other videos to understand more about this?
Yep
@@MiguelLuna1 look up derivatives and how they work on youtube
By far the best breakdown of shorting on RUclips.
Swole man making smart investment decisions I see you man! My older brother used to talk about you & your channel since 2011 so it's pretty cool seeing you here. I hope you're doing well man & good luck to us both!!
@@EnergeticGiraffes Appreciate it man! Super cool about your brother. Hope you’re both well 👊🏼
I agree! Everyone else is like reading the Wikipedia description which is very confusing! While this guy is great , I think the cartoon animals talking about what Quantitive Easing (QEs) is was classic
you hot
My brain can’t comprehend any of what investor b does
The one thing I struggled with was how you can "borrow" shares and sell them, and this video covers it VERY briefly, but more thoroughly than any other source I've found. Basically it's like taking out a loan but in the form of shares, as I understand it
The institution that maintains your margin account borrows the shares for you. Since most stocks are held in a "street name", i.e. the name of the institution -- Schwab, or Fidelty or e-Trade, etc., they technically have ownership of most of the shares in their clients' accounts. They can make use of those shares to deliver to a buyer the stock you short. If they run out of shares of a particular stock they can still try to arrange to borrow the shares they need from another institution.
I came here to understand how one can borrow and sell also
@@Katlick it’s no different than borrowing $500k from a bank and “selling it” to a homeowner in exchange for their home.
@@mobilegameclips5628 And what are you giving back to the bank is such case?
@@guyeshel9316 um money? its a loan
you have to pay an interest fee on shorting because you borrow, if you didnt it would be free money.
This was literally the best description of short selling I’ve heard on RUclips. Finally, someone with a simple explanation with great animations included. Thank you!
I bought a stock that was going up, the moment I bought it, it has been going down for 2 weeks straight.. lol.. if I owned funeral homes, humans would become immortal
Am dead🤣🤣🤣🤣💀💀💀💀!
Same bro!
If you ever want to buy some stock tell me first to buy some so it will fall crazy in it's history and you can buy it cheap
DO IT
Hahaha🤣 i can feel ur pain bro😄
Yes that’s cause you probably bought a stock when it was significantly going up. So you probably bought a stock right before a sell off which isnt good
Had to come watch this during the current $GME short
same
Same here
Finally I understand how a short works! Great job keeping it simple. Thanks you so much!
One of the best explanations of short selling that I have seen on RUclips. I think I’ll stick with long positions and sleep better at night. Thank you plain bagel!
Who’s watching this after GameStop stock blew up
☝🏽
And amc
Occupy wall street, by taking their money and moving into their offices.
im here
This guy
Came here to understand whats going on with Gamestop's stock. LOL
Did you understand
@@HUNTER-ox2of Oh, I understand 🖐💎☝
original
Me too lol
Still don’t get it
Best explanation I’ve seen on RUclips yet and I’ve watched a log of videos. This is by far the easiest way to understand shorting.
This explained it really well. I always had a hard time understanding the leveraged position part but this cleared it up for me.
After a few years my shorts are usually too worn out to sell. I just chuck them in the bin.
Nice. Your kids must love you lol
I'm lost. I need to watch this 10 more times.
lol, I knew some of it before watching this video so I wasn't as lost. The fact that if many start to buy in can surge the stock, got me doubting to ever short again. =/
I know I finally got it this time:
Take a stock worth 1k
Sell it for £1000
Make some maintanence fees to the guy your borrowing from - £50
It's dropped to £700
Buy it back at £700 and give it back to the guys managing that portfolio
Keep your £300
DEEGE GAMING u missed the 50 bucks of the fees on your total lol
1:00~2:35 is the crux
Don't even bother, there is much more to gain from going long. Why risk money when you don't need to. Just be patient. Buy great stocks now that are beaten down by the pandemic, hold and then sell on the positive news of a promised vaccine. There are many of them out there.
Perfect explanation. So many videos out there telling you how to press buttons on a computer, rather than explaining the whole process in its essence.
You sir is such a awesome guy! Just discovered this channel and subscribed right away. Your videos never get boring even in a second.
Who's here during the GME short squeeze?
Shorting stocks can be lucrative but it offers limited profit with unlimited losses 🤷♂️
Unlimited only if you want them to be unlimited... That is if you continually replenish your marging account, otherwise your broker will close your position well before you can lose more that what you invested
This is if it is not shorting Sears stock!
It would also be interesting to know how high the productivity of these stock traders would be if they were doing value-added work.
It seems to me that the only difference between unemployed and stock traders is that stock traders are not paid by the state (unemployment benefit) but at the expense of companies and their workers.
Stop loss
I have heard this explained many times but couldn't understand it. But after watching this video I finally understand short selling. Thank you!
“Theoretically”
WSB: HOLD MY BEER 🦍🚀🦍🚀🦍🚀
In late 2019, those who shorted Tesla are crying the blues...
I’ll have you know someone recently became a millionaire from shorting
Tesla.
He was a billionaire before.
@@jerry3790 lol
i hope hope all the investors who short tesla go bankrupt, that'll be a sight to see.
i dont know man you just need to know how to pull out ( ͡° ͜ʖ ͡°)
Elon Musk must be so happy. I read how much he hated those short sellers
Short sellers: ‘exist’
Tesla stock: it’s free real estate
@JOhn Doe You could say his account was...short lived after taking that position.
my options sure did age well though
@Art Of Illusions it will go back up eventually. We just have to sleep for a week or a month maybe.
@Art Of Illusions And now it is going up
@Art Of Illusions and then it will go up. :)
“You can lose an infinite amount of money”
UNLESS you are well-connected, THEN you can get purchases of the stock frozen, forcing the stock price down and scaring those who bought into selling at lower and lower value.
hi, im new to this, can you explain that ?
@@katz7476 unless you live under a rock your just trollin right now lol
@@katz7476 its what happened with gme
@@regidus not everyone knows about stocks, before you knew what was going on u we’re just like that guy.
@@nickalvarez2962 yeah your right. I just meant this has been all over the news thats all
The dividend pay-forward being characterised initially as a cost would confuse people. The reason you pay out a dividend to the stock lender is because your short position value increases 1:1 with the required dividend payout. Thus it isn't a cost but merely a value exchange (they get the dividend from you but you get a higher value short position as the stock decreases)
One of the better videos I have watched regarding shorting stocks.....it still surprises me how many people have not watched The Big Short. Keep up the great content!
I've watched it, I knew they had big risks, I didn't know it was that big
This channel is one of the best in its kind. I just spent months going through a lot of videos to have a better understanding of finance, and your videos are clear, relatively short without being too short, and give great explanations about diverse subjects. Thank you for this great content, hope you'll keep making those.
Watching this on 2021 because I wanted to learn shorting in crypto. Very informative and understandable video.
Thank you so much.
1.5 million views
clearly deserved as much subscriptions
thanks pal, your work is crafty
I have been requesting this video for so long and you DID NOT DISSAPOINT!! Thank you so much!!! 😄😊😄
thank you this is the most comprehensive lesson in learning that I understand nothing about economics
Great video. I've had a few people explain short selling to me and still couldn't understand it --- until now. Maybe it's the teacher. I'm certainly not going to blame myself!
Essentially this is the best dad joke ever, that is if the dad is an investor.
Son: HEY DAD I TOOK MY COMPANY PUBLIC!
Dad: That is wonderful, put me down for $25,000
Son: Wonderful! I'm so glad you have so much confidence in me!
Dad: Short Stocks
Son: ....
your first statement trun it down
I thought we was gonna do euthanasia
OMG THIS IS THE BEST DAD JOKE EVER...
IF YOUR DAD IS AN INVESTOR
AND YOU ARE A 10 YEAR OLD WHO HAS NOT EVER HEARD A DECENT JOKE BEFORE
Lol
@@dinsel9691 I tried, stepped on a land mine and exploded. Give me credit for taking the step tho.
That moment when you thought you had enough of nonsense content, and decide to take the situation in your hands and make a better content so everyone can understand your language, then stumble over this channel and be like...oh ok...maybe is a bit too late, someone made it already. Great content keep the hard work.
Great video! Just subscribed. Great explanations, great pace and examples. Keep em coming!
Best explanation I've seen. Simple and to the point.
The main thing this video sadly does not cover is shorting bonds, which is much, much, much more common than shorting stock due to their capped upside and is basically one of the most important things that banks do to lend money to companies while capping their risk (for example, shorting company A's bonds, to lend money to company B that has company A as their only customer, and pocketing the difference in yield).
Similarly, the AAA-ranked mortgage-backed securities in the big short were bond-like securities that normally have very little volatility, have capped upside, are easy to borrow for shorting, any only had a few % yield over T bonds so that shorting them would only cost you a couple % of your investment each year at low risk, but had a huge payoff in the event of a default.
Technically there are stocks with uncapped upside. One thing he didn't cover is reverse splits. Many companies constantly dilute themselves into oblivion(for example biotechs) to fund operations and reverse split to keep the share price above exchange minimums. The gain on this is uncapped. It also applies to leveraged inverse ETFs like FNGD where if you had shorted it in 2018 you'd have made like 1000x your money.
GME is why I am looking this video up.
Thanks for letting us know
@@dankenlightenment8903 you have also helped me explain what a Short Sell is. You have been very helpful.
recommended is why I am here
I'm guessing you're sitting pretty on AMC at the moment 😉👍
@@jay-lm4we Hell ya, I only have 42 shares, but some is better than none.
Short, straight to the point, clear and precise. Very nice video.
I FINALLY understand it. Thank you for a clear, unrushed explanation.
I was confused for an hour about short long positions and the security ownership..
You cleared my doubts completely in this video.
Very comprehensive video !
Way to go !!!!
I can't help to think that "investing" is more of a game people play to make or lose money, than it is a way to invest in ideas (corporations).
That is exactly what it is, you just listed the definition. I don’t know where you got the idea of investing in ideas. It has always been a game. 😂
Your thinking of venture capital. Venture capitalists invest in ideas.
@@chuckbizzert9098 I went to public school lol! No, I guess I mean it in a broader sense. Like in the ' market place of ideas'. As an institution really is the rationalization of an idea or idea's. And through the stock market one can invest in that. Though I get how it's not really treated or viewed like that.
No that's short and futures and options. Actual investing is fundamentally different to this trading (venture capital is investing in ideas). However, valuation is essentially 'guessing' how the company will perform
it is the fastest way to gamble away infinite amount of money
thank you for making long and short very clear. although i do not invest in stocks AND SHARES i am interested in learning more about such complicated investment tools and strategies.
Thank you for this video it is very helpful!! I am an amateur still so I will watch this video over and over until I get it fully 🙏🏼
Great information as always, I never quite understood the process of going short until now. If I may make a request for a future video that I struggle to find simplistic information on, the methodologies of calculating the value of a company and hence its stock price. In order to work out what would be an ideal price to look for when attempting the paradoxically impossible task of buying low.
John 15:10
The fact that your losses are unlimited inhibits me from short selling.
I like the potential of unlimited gains better 😊
Made you realized how crazy those guys in "the big Short" were...
@@fitrianhidayat They all walked away richer though. They'd all done their research and knew that the defaults were inevitable. They had to settle for less, however, because the Banks didn't have the liquidity to pay their bets - a little ironic.
However, how often do.you see the theory play out?
Right?
Instant like and subscribe. Thank you very much. I knew how it worked but for some reason I always had struggle explaining it. You definitelly helped me on that one
Brilliant explanation, thanks. Will be checking out your other stuff.
I think Melvin at Citron forgot to watch this video before shorting GME.
They have an algorithm to decide what company's to short and they were just mindlessly following that module. Bad idea especially if you have a podcast/newsletter that tells rando's exactly what you are currently shorting.
Who’s here after $GME?
Lol, that’s exactly why I’m here. Then I started to scroll through the comments looking for anybody else 😂
BB 🌈🐻
Its amazing what 2 million degenerate autists are capable of
Well this was briefly explained and it's honestly as simple as it gets. At least theoritical that is.
Basically longs for upwards movement, shorts for downwards movement. And with the market almost always going up it takes a damn long time to start seeing huge digits whereas shorts could do it in half the time or even less. Only thing is long time investing almost ensures wealth, short is gambling all or nothing.
Thank You ! The best and simplest explanation there is .
We all know why we're here
We're still here
Nice video, Rich!
I like how perfectly this video is placed.
June 2019, providing an example that the market will crash over the next two years and look where we are
Great video man, I get a lot of value out of these, keep them coming, much love.
The youtube algorithm brings us together once again. After GME has started to short squeeze, this video popped up in my recommended feed lol
Margot Robbie explained it better i think, but this guy is waaaaay hotter.
dude thats gay
Dude looks like Conan O Brien
we are all gay on this blessed day
nice swap brah
Kinda gay not gonna lie bro
The Hedge funds that are shorting AMC needs to watch this... I don't think they understand the trouble they're in🦍🚀
R u still holding?
Great video! Love all your graphics and sound effects! I'm definitely a visual learner and loved learning more about this through your video!
Sorry for writing you, just out of curiosity your page come up on my suggested friend lists so I was just wondering if I knew you from somewhere???
Watching this after G$ME and $AMC is going crazy 🚀🚀🚀🚀
Great movie! I read the book first, and then saw the movie. The book is like 10xs better because it’s more explanatory.
Thanks for this video. It really helped me understand this method much easier
Excellent video. Better than what else I've seen so far.
Simple definition: Shorting = Gambling...with Mob money.
The "MOB" now works on Wall Street and wears tailor-made $1,000+ suits.
@@1notgilty more profit when its legal
@@nemeanlioness Right. If you lose with the Wall Street mob today they don't break your legs. They just take everything you own and everything you will ever own and then get a tax deduction for their other ill-gotten gains that is paid for by the rest of us suckers. It's much more profitable than the mob ever dreamed and it's completely legal.
@@1notgilty not if you trade under a corporation. Just file bankruptcy keep it moving
Congrats, you just described capitalism, the system which threatens our very existence. 👍
Who is here after the GME short squeeze?
For a new person just starting out in the world of crypto . This video really is done well keeping it simple and the explanation is easy to understand . Thank you very much !!!!!
thank you for the informaion, its all about timing "shorts and long" and market trend
Great explanation. I love the detailed perspectives and the examples given. :)
My observations have been that short-sellers are always on the edge of things: any announcement/news might send them in a "panic" move. Often, in margin trading, the house is always the winner because it not only collects fees and interest payments, but it can also liquidate your position through collusion with other (bigger) investors at any time.
All in all, short selling is a strategy that works only for a certain amount of time, mostly to get money/liquidity quickly. Going long and diversifying do offer more sustainable ways to grow your capital.
Thanks been interested in this for a while now
Best concise clear explanation on short sales!
The fact that even if English isn’t my mother tongue, I understood the topic speaks by its own. Great video 👌🏻
Something interesting to note is that you can short financial assets without the associated costs using derivatives such as CFDs. This also comes at a large amount of risk however, as CFDs utilise large amounts of leverage. The 'stop loss' feature comes with gap risk. There are also Put Options in which you can only lose the premium you pay initially.
CFD is illegal in usa
Cfd are considered gambling in the uk. I dont think its an intelligent position
very informative! i also love the way bill ackman once described it. its like borrowing coins from friend that you believe will lose value. you "borrow" your friends coins and sell them for $1000. then the coins prices go down to $500 so you buy the coins back for $500 netting you a profit of $500. then you give your friend back his coins and he has his same coins back you you made a profit. may have to give your friend some interest for "borrowing" his coins ;D
I just finished The Big Short. It's got me more intrigued than ever on how our economy/society works. I remember when 2008 happened. But I was too young to understand it as I was just entering my adulthood. Nearly 14 years later after learning about everything else that's fucked up in the world, that movie was the Cherry on top. Like Vinnett said. ...
Great vid. Never had it explained so well. Now I know what a short squeeze is. Thnx
Short the short sellers, DOUBLE INFINITE MONEY!!
Brandon Lee that’s what caused the 2008 financial crisis
The IQ level of these guys is too damn high
I have never understood how this became a thing. It feels like there should have been someone way back when who told people to f off when someone said they wanted to sell stock they don't own.
Like when people sell property they don't own? You know, like their houses?
When people sell products/services they don't own (which is most people, ie they haven't paid for them yet, but will pay later when then sell them).
This isn't anything but dropshopping a speculative price. As the other poster said when people sell their homes that aren't all the way paid off, they don't own it the back does.
Now that was simple and to the point, thank you.
Awesome video! I think this would be a good one for everyone to watch as of the last 30 days!
Think about it like this.
You see your mom has a broom. You know that the broom business is going to crash in one month because the tech company Orange built the new iVaccum. It will obliterate the broom market. You have a month till the iVaccum hits the market.
So, you borrow your mother's broom promising to give her a broom back. She says ok as long as she gets back a broom. You now have a broom that you know is valued at ($30). You find a SUCKER in need of a decent broom. You sell him the broom for the value that it is worth ($30). Your happy because you made the sell for what the broom was worth. ($30) is now in your pocket.
The iVaccum hits the market and YOU WERE RIGHT, THE PRICE OF BROOMS PLUMMETS BECAUSE OF THE DEMAND FOR iVaccum. In order to keep your end of the bargain with mother, YOU BUY A NEW BROOM VALUED AT ($10). You now have $20 in your pocket. MOM IS HAPPY BECAUSE SHE HAS HER BROOM BACK, YOU ARE HAPPY BECAUSE YOU MADE A $20 PROFIT.
Mom = Broker
Broom = Stock
Sucker = Sucker
Different Scenario:
You're screwed because after you sold the broom for ($30) to a sucker; you waited too long to buy back another broom. It was found that iVaccum was defective and killed 3 cats. The general public loses faith in Orange's iVaccum and decides to trust the old reliability of the broom. The Broom prices skyrocket from ($30 to $45). While you sold the broom to a sucker for ($30), YOU STILL NEED TO PROCURE A BROOM FOR YOUR MOTHER. As a result, you go to the store and buy a new broom for ($45). You give your mother back the broom she was promised and NOW YOU'RE THE SUCKER. YOU HAVE NOW ACQUIRED A -$15 LOSS.
That was helpful, thank you :))
Wow. Thanks you made it easier for me to understand 😅🥸
Conan O'Brien's son knows how to give an explanation. Thanks, man 👍
Thanks for the breakdown. I came here to try and learn because the last 2 months (as of 4/12/21) the market has been a shit show and only shorts are cashing
Very clear explanation, thank you for this video 👍
This is very useful today. You forgot the part where wall street investors lose all their money but get bailed out by the government.
wow definitely something new i learned today. here’s my like to you!
incredible explanation. thank you
This video really helped me understand what shorting is.
This has been one of the best explanations I heard. Still I don’t feel sorry for the losers. This the price of playing the game!
Now the movie trading places makes so much more sense.
very, very well explained. Thank you.
Great video. This is why I went with SPXU, leveraged inverse ETF. The market rallied unexpectedly before it crashed. But I was able to ride it out indefinitely even though I was down 30% at one point. Plus, the S&P 500 can only rise or fall a limited amount.
Exactly. He doesn't even mention that you can short the whole market or an index to mitigate volatility and risk.
Thank you. The situation with GME short sellers losing $1.3 billion makes sense now
So did the short sellers lose because wallstreet bets bought tons of stock and caused a surge which fucked over the actual short sellers because they have to pay their margins back?
I came here to learn what all this is about after the whole GameStop thing. Took me a few minutes to wrap my brain around this, but here is an analogy I came up with to understand it:
My roommate bought an apple for $10. I borrow the apple from him, promise to return it tomorrow, and sell the apple for $10. If the price of the apple tomorrow is $7, I'll spend $7 out of the $10 I received from selling the borrowed apple, and keep the $3 change. If the price of the apple tomorrow is $100, I'll have to spend an additional $90 out of my own pocket in order to buy the apple back for my roommate, who now owns an apple worth $100.
Great explanation. Thank you!
An eye opener indeed, Thanks for making a simple video