The original meaning of shorting and now.

[barry_1]

We keep getting chat on the forum,by new forumites that don't seem to know the meaning of "shorting"....The original meaning was SELLING a share ,you do NOT have in your possession,in order to BUY it at a lower price and then delivering it to the buyer within a certain timespan. The difference between the selling and buying price is then your profit,also called the margin.It is still in use today,but you must be a trader that has millions and the dealers must be able to trust you.Things have been tightened up and a BEAR SALE i.e. GOING SHORT must be declared to every one and i think you only have five days to complete the trade.

[Blik]

I am sure Simon has covered this in one of his previous Educational Newsletters, under Jargon Busting. If not maybe he can help those who dont know.

[Blik]

All who need help look under Help and Education and download Educational Letter 13.

[barry_1]

Now using derivitives either SSFs or warrants,basically the same principle applies except the stockbroker does all the work for u.As the share price drops u profit by going "SHORT!" .PLEASE DO NOT SAY THAT U ARE GOING SHORT if u feel that a share is fully priced,JUST SAY U ARE SELLING to buy again when the price turns lower.Usually one can only go "SHORT" on large caps.We consitently get newbies saying that are going short on smallcaps.

[#5]

dankie barry. nie gedink jy het so groot probleem met newbies nie.

[KVW]

The mistake people with understanding short and long they think short term and long term investment.....Are you going to short some people understand as they are trading the short upward spurt in the price.... and long they will ride the wave. This is the understanding from speaking to people that are not on the market but try keep informed...or should I say mis-informed. So its not stupid and therefore no reason to come across as, remember we all trading as individuals and we should be here to assist eachother not insult. Come on guys all trying to do the same thing here make money.

[barry_1]

Its not a case of insulting,some traders make no effort to do any research.It is insulting to continue to use the wrong terms when its been pointed out so many times that the terms are wrong.Sometimes people feel that by using the terms they will fit"in" better.I am always willing to give advice when asked,if its in my field,if not i say so.

[#8]

Barry there are other platform out there, it not only SBK you know ??

[barry_1]

OK i stand corrected,but not on this platform of SBK is it possible.The fact remains that those that use the term wrongly have no idea what it means and are referring to trading on SBK.

[mehroon]

I think going short could also mean this - I hold 2000 AFX. The price 2000. I sell these because I think the price will drop. When the price does drop to say 1800 I buy them back. I went short on AFX.

[barry_1]

Now thats a good idea,preserving your capital when you think a share price has run too hard,then selling and then buying again at a lower price,but thats definitely NOT GOING SHORT!....in the case of going short you aim to PROFIT and make more money from the actual fall in prices.The futher it falls the more you should make!As Blik was saying there is information under Help and Education.

[divz]

micky ya thats not going short...going short is selling an asset you do not own and buying back hopefully at a lower price...on ost the assets can only be ssf and i think warrants(i dont do warrants so not sure)example you sell 20 OML SSF contracts (withoput owning them) at a price of 1100 and buy them back at 957(profit) or buy them at 1150 (loss). The principle is that you basing your trade on the price going down instead of up

[olilau]

from a newbie's perspective (but i do know the subtle diff on going short and selling a hard run share with the HOPE of buying it back later for less) - mickey, in a shorting transaction you are committed and will make a profit on a drop, but will take a loss if it doesn't. if you sell a share on the high hoping to buy it back, no one will force you to re-purchase the share, you can walk away. you may have used the principles of shorting, but its only an intention to act. i do not take barry's comment as an insult. he is trying to make a valid point on the forum regarding the proper definition of the term shorting. fact is that the term is often mis-used. now some people may think thats semantics but others don't. just take the info and consider yourself educated - whats wrong with that. thanks barry, for the record, i enjoy reading threads that are informative. :)

[Blik]

Am I a newbie? After 6 years of investing I think I can say that I have reached the first rung or two of the ladder. When I bought my first tentative bid of 200 DST at 2450, with the ALSI at 8860, I thought I was taking a huge risk. I had little understanding of the inner workings of the JSE; Puts and Calls were words used in a bar: please Call the barman to Put my beer here. Ratios were vague mathematical terms that I only could just fathom. I didn't know that a stock and a share were the same thing. I was super green. About the only thing going for me was a willingness to learn, read and possibly take a risk. There was no way I could imagine an ALSI of above 32000. Soon after the DST purchase I bought a couple more stocks - some pretty lame ones, some good which I still hold and some the transformed into other through stock splits and the like. Over the past six years I have subsequently learnt a few ratios, I can read a balance sheet, albeit with difficulty, and I know that I do not know enough to get involved in trading, derivates, puts, calls, warrants, SSFs and anything else with gears (other than my mountain bike). So where am I today, after watching a 250% gain on the JSE, then a 50 % drop, and now a slight recovery. Do I consider myself to be a qualified investor - hell no! I think I just make the first rung or two of the long ladder to financial security. Important lessons that I have learnt are - that I will never know enough, and that I need to keep reading and learning - stay out of debt - use your own money with caution and use the banks money with extreme caution - have the nackers to take a risk, but don't risk your pension. And most importantly stay in the game - because things will get better - it's just a question of time. Without the help of people on this forum, and friends around me, I would have been out of the game a while back, so we should all try to help any newbie with as much good honest and practical advice as we all can. This is not a dig at pervious posts about newbies - but rather an appeal to help all who ask for it - irrespective of the question. And while I agree with Barry's point about terms being used in the wrong manner - it is up to the experienced people to help out. That's my bleeding heart view anyway.