Stephen Pizzo: Risky Business
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Author:  Catherine [ Sun Oct 08, 2006 4:32 pm ]
Post subject:  Stephen Pizzo: Risky Business

Stephen Pizzo: Risky Business
Oct 8 2006

Democrats are shorting the GOP. If they're right they will win big this November. But if the GOP's stock, now in free fall, should reverse, the Dems will be toast.... milquetoast.

Here's the deal. In the stock world a short seller doesn't actually buy the stock they short. Instead they contract to supply that stock to a long buyer at the other end of the transaction at the price the stock was selling the day the contract was signed. If the stock keeps going down the short seller is able to buy it at a lower price and the long buyer is obligated to buy it from the short seller at the higher price set the day the made the deal. The difference if the short seller's profit. If the stock goes up instead of down, then the guy at the long end of the contract gets to buy the stock the low price and sell it at the current high price.. the difference being the long buyer's profit, and the short-seller's loss.

In short, shorting is risky business.


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