someone explain shorting the market and going long on something -

[2Design]

This was posted in another forum and I am trying to understand what this means and what they would invest or ask for or can someone do this through etrade or other online investment banking

<snip>

My freaking god. I had a “fun” 500 share short at the close on Friday.

So, I’m getting what, 12.5K in the a.m.?

That will definitely go to charity.



Wow, I’m very long US indices and short Bear Stearns.

LOL, much better to be lucky than smart.

</snip>

[2Design]

1. here is the information from wikipedia

http://en.wikipedia.org/wiki/Short_%28finance%29

In finance, short selling or "shorting" is the practice of selling securities the seller does not then own, in the hope of repurchasing them later at a lower price. This is done in an attempt to profit from an expected decline in price of a security, such as a stock or a bond, in contrast to the ordinary investment practice, where an investor "goes long," purchasing a security in the hope the price will rise.

The term "short selling" or "being short" is often also used as a blanket term for all those strategies which allow an investor to gain from the decline in price of a security. Those strategies include buying options known as puts. A put option consists of the right to sell an asset at a given price; thus the owner of the option benefits when the market price of the asset falls. Similarly, a short position in a futures contract, or to be short a futures contract, means the holder of the position has the obligation to sell the underlying asset at a later date.

[janetblond]

2. Go to Investopedia dot com

Everything you want to know is there.

[Deny and Shred]

3. Going long means hoping the underlyimng security INCREASES in value

Shorting means hoping it goes down.
Every trade has a BUY and a SELL. Going long means buying first, then selling. An investor does so when they think the stock will go up. Whether it does or not, it is an 'open' position until this BUY is matched with a SELL in the same account. If one buys low now, and sells high, later, she pockets the difference.

Shorting a stock is simply entering a SELL order first. The investor gets the cash at the time of the sale, but owes the brokerage firm the appropriate number of shares. Technically, the brokerage firm borrows these short shares from another investor at the firm who holds them in their account.
This remains an open position until that SELL order is matched with a buy. One shorts when they believe the price is too high. Since they didn't buy it before, to profit on it now, the investor will sell now and buy it later, hoping the price falls in the interim.
The riskier part for short sellers is twofold. The stock, potentially could go up forever, and they will need to buy it. The stock can only go to zero, so their profits are only so much.
Second, the brokerage firm who lent the short shares may find that many holders are selling their shares, and the firm can no longer lend them. They may DEMAND the money to buy them back, since the account is owed a SELL.

Short sellers usually understand price floors, and try to sell through them. They act in concert to put big time downward pressure on a stock and trigger panic selling, so they can buy later when the price falls. Shorting is not for the faint of heart, beginners, or people without quite a bit of $$$ on-hand to cover any bad shorts.

Hope this was helpful. Any further questions, lemme know.

[gravity]

4. Shorting is borrowing a security than selling it, hoping to buy it cheaper

You gain cash when you sell it, but you can't realize it until you returned the stock to the broker. If you buy it back for a cheaper price, you get to keep the difference making a profit. Of course you can lose money if the stock goes up, which is potentially an infinite amount.

In layman's terms, you are betting that the stock will go down instead of up. Going long is just buying a stock normally hoping it will go up, and is what most folks do when investing.

You can do this on an etrade or another brokerage if they allow you to open a margin account. If the brokers think you are high risk, they won't do it, but if you have enough assets and some investment experience, they should allow it.

Now going short is only an investment strategy for experts, because you can lose more money than you originally invested. If you go long, you can only lose how much money that you invested in the market. Going short, you can potentially lose an infinite amount. Also in the long term, stocks always tend to go up, so you are playing against this trend.

If you think the market is going to go down, it is much safer just to hold cash. You don't risk losing anything, and if the prices go down, you can buy more stock at a cheaper price.

[TomClash]

5. Specifically

The poster's saying he sold BS earlier in the week (or month or year) and bought to deliver the securities toward the end of the collapse on Friday to cover his sale. Essentially, he sold before he had to buy - if a stock/bond/currency/commodity is tanking you make money.

Being long on the indices means he's bought the a basket of stocks (like the S&P 500 or DJIA) when they trade as a whole and he's waiting for the price to go up and he thinks it will. Being short on BS means he made money on the BS collapse because when he delivers the BS stock to the buyer, who paid him, say $70 per share, a few days ago, he only had to pay, say $35 per share, on Friday.

That's why he's talking about luck.