Shorting query
Discussion
I've read up on it but I'm still unsure of how it works.
1) How do you find someone to loan you the shares ?
2) Do you have to name a date when the transaction expires ?
3) if the shares rise what happens.
I know the shorter will lose money but where does the loss go to ?
4) I understand that the owner of the shares will get a small % from the shorter so how is the % calculated ?
5) Apart from the % the owner gets what's in it for him ?
6) So a share is shorted , it's loaned at £4 a share and drops to £2 a share how does the shorter realise his gain ?
1) How do you find someone to loan you the shares ?
2) Do you have to name a date when the transaction expires ?
3) if the shares rise what happens.
I know the shorter will lose money but where does the loss go to ?
4) I understand that the owner of the shares will get a small % from the shorter so how is the % calculated ?
5) Apart from the % the owner gets what's in it for him ?
6) So a share is shorted , it's loaned at £4 a share and drops to £2 a share how does the shorter realise his gain ?
Thank you Donkey.
So for clarication.......shorting is usually conducted by an investment bank and a hedge fund .
The investment bank loans the shares to a hedge fund for a commission , the commission is commensurate with the amount of interest displayed by the market .
If a private investor wants to indulge in shorting he will do it via a CFD.
I presume if a private investor had several millions to speculate he would be able to go short via his broker, I presume he would need a broker to do this .
Otherwise I presume he might go on a platform like HL and use a CFD , is that correct ?
So in the case of Aston Martin as an example ........
If you had wanted to short their shares and borrowed 1 million shares soon after the IPO at say £18 a share and they now stood at £5 you would have made a profit of £13 a share , i.e. £13 million less the commission.
How then does the hedge fund return the borrowed I million shares to the investment bank whilst realising that £13 million profit ?
Sorry to be so thick about this.
So for clarication.......shorting is usually conducted by an investment bank and a hedge fund .
The investment bank loans the shares to a hedge fund for a commission , the commission is commensurate with the amount of interest displayed by the market .
If a private investor wants to indulge in shorting he will do it via a CFD.
I presume if a private investor had several millions to speculate he would be able to go short via his broker, I presume he would need a broker to do this .
Otherwise I presume he might go on a platform like HL and use a CFD , is that correct ?
So in the case of Aston Martin as an example ........
If you had wanted to short their shares and borrowed 1 million shares soon after the IPO at say £18 a share and they now stood at £5 you would have made a profit of £13 a share , i.e. £13 million less the commission.
How then does the hedge fund return the borrowed I million shares to the investment bank whilst realising that £13 million profit ?
Sorry to be so thick about this.
Edited by avinalarf on Thursday 22 August 05:25
Oops ......one last thing.
Why would you lend someone shares to short the shares and then see the shares that you the lender own fall in value ?
Surely if you own shares you want to see them rise not fall and not facilitate someone who wants them to fall in value.
Apart from a commission the lender doesn't appear to be working in his own interest.
Why would you lend someone shares to short the shares and then see the shares that you the lender own fall in value ?
Surely if you own shares you want to see them rise not fall and not facilitate someone who wants them to fall in value.
Apart from a commission the lender doesn't appear to be working in his own interest.
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