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Regarding stock investments ... the difference between long and short?


Regarding stock investments ... the difference between long and short?

Going long a stock is when you buy it in expectation that it will go up in price. You are bullish.

Going short a stock is when you think the price of the stock will decrease. You put in an order with your broker to sell the stock short. He finds someone who will sell you the shares that you want. You receive the proceeds from the sale and they are put into your "short" account. You do not have access to those funds, but they are ledgered in for you. Some time later (there usually is no time stipulation like when buying options), you will buy the shares back (hopefully) at a lower price that when youj initially sold them short. You will not receive the shares, but the difference between what you sold them for and what you just bought them back for, goes into your brokerage account.
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zackly right. The problem with selling short is that theoretically your risk of loss is unlimited. Say you sell Amgen short at $56. If it goes down to 50, you made 6 per share. However, if they announce the cure for all cancers, diabetes and world hunger and it goes up to 500, you owe your broker $444 per share. Rather than selling short, consider selling a put option.

Long means you make money when the stock goes up from $1.00 to $2.00

Short means you make money when the stock goes down from $2.00 to $1.00

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