1. Tommy Huynh's Avatar
    Hello I am fairly new to Crackberry and also new to the stock market. I own a little bit of stock in Blackberry because I know how efficient a Blackberry device can be. I've switched from a Sprint BlackBerry to an Iphone 5 about 6 months ago and I am really missing the efficiency that my BlackBerry gave me. I will be switching to the Q10 once it releases in the U.S.

    My question is about "shorters" of Blackberry. From my understanding they are betting that the stock falls am I correct? Can someone tell me at what price they are betting the stock price to fall? Basically, can someone please explain to me how they will win and how they will lose?
    03-28-13 02:52 PM
  2. jackdunhill's Avatar
    03-28-13 03:14 PM
  3. mset's Avatar
    Briefly, you can sell a stock short (that is, sell it without actually having bought it) at any time (with a few limitations). Short sellers 'borrow' the shares from something called the 'loan post' (I won't get into the details here), and then they sell to whoever is bidding for the stock.

    So now they have borrowed i.e. 1000 shares and sold them, let's say at $15. They hope the price goes down. If the price goes down to $12, they can buy shares to replace the ones they have borrowed. In this case, they will have sold 1000 @ $15 and will buy them back for $12, making a profit of $3 per share. As long as there are shares available to borrow, you can short a stock at any price you want.

    They lose when they sell the stock at $15 and instead of going down, it goes up. Remember, they borrowed the 1000 shares and they have to replace them (there are several rules that determine when they must replace them. On liquid stocks they can hold them indefinitely as long as they have enough cash in their account). If the share price goes too high, they may have to buy the stock back at i.e. $20 before it goes any higher. So they end up with a $5 loss per share.

    Please note - shorting stock is one way in which your loss can be theoretically infinite, since there is no theoretical limit to how high a stock can go. Of course there's a common-sense limit but the point is you can lose a lot of money shorting stock.
    Last edited by mset; 03-29-13 at 12:21 PM.
    Tommy Huynh likes this.
    03-29-13 02:01 AM
  4. CDM76's Avatar
    Check out this thread as well ... http://forums.crackberry.com/bbry-f3...shares-666490/
    Tommy Huynh likes this.
    03-29-13 02:09 AM
  5. Tommy Huynh's Avatar
    Briefly, you can sell a stock short (that is, sell it without actually having bought it) at any time (with a few limitations). Short sellers 'borrow' the shares from something called the 'loan post' (I won't get into the details here), and then they sell to whoever is bidding for the stock.

    So now they have borrowed i.e. 1000 shares and sold them, let's say at $15. They hope the price goes down. If the price goes down to $12, they can buy shares to replace the ones they have borrowed. In this case, they will have sold 1000 @ $15 and will buy them back for $12, making a profit of $3 per share. As long as there are shares available to borrow, you can short a stock at any price you want.

    They lose when they sell the stock at $15 and instead of going down, it goes up. Remember, they borrowed the 1000 shares and they have to replace them (there are several rules that determine whne they must replace them. On liquid stocks they can hold them indefinitely as long as they have enough cash in their account). If the share price goes too high, they may have to buy the stock back at i.e. $20 before it goes any higher. So they end up with a $5 loss per share.

    Please note - shorting stock is one way in which your loss can be theoretically infinite, since there is no theoretical limit to how high a stock can go. Of course there's a common-sense limit but the point is you can lose a lot of money shorting stock.
    Thanks a lot brother I understand it now.
    03-29-13 03:51 AM
  6. kcdist's Avatar
    Thanks a lot brother I understand it now.
    Understand the mechanics of shorting, but not the theory of shorting BBRY. What I don't understand is why would the shorts choose BBRY as a target at $14-15?

    Certainly shorting BBRY made sense when it was in the $30s. Or shorting another tech stock like AAPL or GOOG (if you think they may falter) makes sense, as there is a lot of room for the price to decline. Even if BBRY announced that it was closing up shop tomorrow, they still have $3 Billion in cash, representing $6 per share. One would have to assume their patents are worth another $3 Billion.......So just cash and patents equals $12 per share.....So, if BBRY called it quits today, a short could theoretically make $2-3. Why bother? Especially because if BBRY continues to perform, it could easily get back up to $30 per share.

    So....very limited downside potential gain versus a very high upside risk. Of all the possible high PE ratio stocks I can think of, why would a short continue to target BBRY - even if they are absolutely correct in their premise that it will fail - which is much further from a certainty after yesterday?

    Don't get me wrong.....when I realized sentiment was against BBRY back in 2010, I did quite well with some Puts, but I can't for the life of me see the shorting investment thesis in BBRY in 2013.
    03-29-13 09:35 AM

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