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Zecco.com » General Investing » New Investors » Shorting
Last post 05-12-2008, 9:59 PM by boonstock. 1 replies.
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  •  05-12-2008, 8:06 PM 28970

    Shorting

    Reply Quote

    Hi,

     

    Question:

    If i short a company that is about to get bought, what is the risk to me, and when exactly will I have to cover?

    For example, if I shorted EDS, there is some risk of the price increasing if HP offers more right? But if the deal falls through I could profit from a short? If I was in a situation like this... when would I most likely have to cover the short position if the deal goes through?

     

    Thanks for the help in understanding a situation like this.

     

    ThugDragon

  •  05-12-2008, 9:59 PM 28976 in reply to 28970

    Re: Shorting

    Reply Quote

    The problem with shorting is that it has unlimited downside with limited upside, because technically, a stock price could approach infinity, while it can only drop to zero. So you could possibly lose more money than you invest.

    Don't take this the wrong way, but the fact that you are asking this tells me that you are not ready for short selling right now. Don't worry, just focus on buying long (hoping that the stock goes up) and do that for at least a month or two. By then, maybe you will learn enough to short stocks. Also, this is a great source to learn from:

    www.investopedia.com

    Good luck investing.
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