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Author Topic: pls help me understand  (Read 1253 times)
bracek
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September 24, 2011, 09:34:20 PM
 #1

what this term actually means :

investor is long/short something,
"he is long gold"

I am not a native english speaker, so feel free to elaborate in many words, examples

thanx Smiley
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GimmeDemBitz
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September 24, 2011, 10:02:32 PM
 #2

When you take a long position, you buy X (stock, bond, gold, whatever) and hold onto it for a long period of time, in hopes that it will appreciate during that time.

A short position means that you borrow X and sell it, in hopes that X will depreciate, so that you can buy back the same amount of X at a lower price, return it to whom you borrowed from, and keep the difference.

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September 24, 2011, 10:06:17 PM
 #3

More generally, "long" means you believe something will go up in price. "Short" means you think it will go down in price.

Saying "I am long on gold" could mean "I own gold because I think it will rise in price" or it could just mean "I think gold is going up"
bracek
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September 24, 2011, 10:51:10 PM
 #4

When you take a long position, you buy X (stock, bond, gold, whatever) and hold onto it for a long period of time, in hopes that it will appreciate during that time.

A short position means that you borrow X and sell it, in hopes that X will depreciate, so that you can buy back the same amount of X at a lower price, return it to whom you borrowed from, and keep the difference.

so btc hoarders are "long btc"
that part is easy Smiley

but how is shorting done ?
I deposit money at broker house,
and I "short silver",
what is actually mine ?
money or silver ?
when is it ended ? 
what if silver goes up, how is my loss defined ?
WiseOldOwl
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September 24, 2011, 11:55:32 PM
 #5

Usually shorting refers to this

You borrow the commodity, like silver, and sell it immediately for currency.
You then buy back the commodity to replace it at a later date.
This is to be done if you think the price is going to drop.

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bracek
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September 25, 2011, 12:45:48 AM
 #6

ok guys, thanx for explaining

this shorting is so funny concept to me...
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September 25, 2011, 01:47:23 AM
 #7

When you take a long position, you buy X (stock, bond, gold, whatever) and hold onto it for a long period of time, in hopes that it will appreciate during that time.

A short position means that you borrow X and sell it, in hopes that X will depreciate, so that you can buy back the same amount of X at a lower price, return it to whom you borrowed from, and keep the difference.

so btc hoarders are "long btc"
that part is easy Smiley

but how is shorting done ?
I deposit money at broker house,
and I "short silver",
what is actually mine ?
money or silver ?
when is it ended ?  
what if silver goes up, how is my loss defined ?
Lemme see if i got it:
(numbers are all made up, i don't feel like searching for the actual prices right now)
Say i want to short silver.
I borrow 20 grams of silver.
I sell it for the current price getting myself 100 dollars and cross my fingers hoping the price of silver will go down.
If it goes down, i buy back more than 20 grams of silver, return the 20 grams i borrowed and keep the difference. But if it goes up i'm fucked, i have to spend more than the 100 dollars i earned in order to be able to return the 20 grams i borrowed.


Is that it?


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WiseOldOwl
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September 25, 2011, 02:09:31 AM
 #8

When you take a long position, you buy X (stock, bond, gold, whatever) and hold onto it for a long period of time, in hopes that it will appreciate during that time.

A short position means that you borrow X and sell it, in hopes that X will depreciate, so that you can buy back the same amount of X at a lower price, return it to whom you borrowed from, and keep the difference.

so btc hoarders are "long btc"
that part is easy Smiley

but how is shorting done ?
I deposit money at broker house,
and I "short silver",
what is actually mine ?
money or silver ?
when is it ended ? 
what if silver goes up, how is my loss defined ?
Lemme see if i got it:
(numbers are all made up, i don't feel like searching for the actual prices right now)
Say i want to short silver.
I borrow 20 grams of silver.
I sell it for the current price getting myself 100 dollars and cross my fingers hoping the price of silver will go down.
If it goes down, i buy back more than 20 grams of silver, return the 20 grams i borrowed and keep the difference. But if it goes up i'm fucked, i have to spend more than the 100 dollars i earned in order to be able to return the 20 grams i borrowed.


Is that it?


Yes except you only have to return 20 grams of silver, you dont have to buy more you can keep the difference in cash. If it goes up you lose money because you still have to buy back the 20 grams to return them

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omarabid
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October 08, 2011, 05:02:12 PM
 #9

What's the guarantee that I'll pay back in shorting?
RyNinDaCleM
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October 09, 2011, 01:07:10 AM
 #10

Some exchanges will only allow a percentage of your cash value in shorting a commodity. If it goes the wrong way, you get forced liquidation!

Trading on margins is risky!

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October 09, 2011, 02:36:46 PM
 #11

HI ,
OP wants to know how shorting of silver is done and another future trader  wants to know what the guarantee is that the loss will be paid. So let's start.

Speculating/trading or hedging(commercial hedging) is done on commodities exchanges. One buys or sells a 'contract' of a commodity (be it silver or hogs or corn). The contract specifies that a certain quantity of the commodity will be delivered at a specified date, at a specified place approved by the exchange.  If you believe that the commodity will drop in price you place a 'sell order'  and thus are obligated to deliver a certain amount of live hogs or so many bushels of wheat at a certain date.

Now more than 99% of the contracts are offset by the corresponding opposite contract i.e before the delivery date you buy a contract if you sold one earlier and you sell a contract if you bought one earlier.

In order to trade you have to put up money and at all times the broker will make sure that your money can cover any loss. If you continue to lose money you will get 'margin calls' and if you don't come up with additional money, your position will be closed (if you sold a contract the broker will buy one 'at market' and if you bought one and are losing too much the broker will sell your contract). At times the money that you put up does not completely cover the loss and the brokerage will go after you till you pay up.

Of course everybody hopes to make money and at times that is done in very large amounts. You can make money if you initially sell a contract (i.e are 'short' that contract)  and you can make money by first buying a contract (i.e. are 'long' that contract). It all depends if the market moves with you or against your position. It also depends how quickly you can get out if something goes against you.
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