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(CNN)   Dow only 200 points from all-time high. DAMN YOU, OBAMA   (money.cnn.com) divider line 82
    More: Interesting, David Einhorn, Mcgraw-Hill Cos. Inc., KOSPI, big bets, barclays, personal care products, Prime Minister of Japan, Lunar New Year  
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710 clicks; posted to Business » on 13 Feb 2013 at 10:39 AM (1 year ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2013-02-13 05:31:29 AM  
Yeah, the rich get richer and everybody else is farked.
Obama doesn't care about the idiots supporting him.
 
NFA [TotalFark]
2013-02-13 05:31:44 AM  
Romney knew this was going to happen.  He even privately explained (recorded on video)  how the market would turn upwards after the election and the Republicans wouldn't have to do anything but claim they were responsible for it.
 
NFA [TotalFark]
2013-02-13 05:58:12 AM  

jehovahs witness protection: Yeah, the rich get richer and everybody else is farked.
Obama doesn't care about the idiots supporting him.


There are a huge number of working stiffs whose 401K or retirement is in a stock account.
 
2013-02-13 06:49:13 AM  
Can someone explain to me how an index that tracks the stock value of 30 large companies represents the economic well-being of the vast majority of Americans?
 
2013-02-13 06:55:19 AM  

miss diminutive: Can someone explain to me how an index that tracks the stock value of 30 large companies represents the economic well-being of the vast majority of Americans?


I think it has to do with golden showers of wealth trickling down on everyone, or something.
 
2013-02-13 08:14:13 AM  

miss diminutive: Can someone explain to me how an index that tracks the stock value of 30 large companies represents the economic well-being of the vast majority of Americans?


It doesn't in the slightest.

And if I had any money in the stock market, I'd start shorting a whole bunch of shiat.
 
2013-02-13 08:15:13 AM  
The trickle should start any minute now

/yep... any minute now
 
2013-02-13 08:26:00 AM  

jehovahs witness protection: Yeah, the rich get richer and everybody else is farked.
Obama doesn't care about the idiots supporting him.


Nobody is stopping you from putting money in the stock market.  I've gone from biatching and moaning to  well... if I can't beat 'em, might as well buy JPM stock.  (btw... it's up 30% since August)
 
2013-02-13 09:04:03 AM  

jehovahs witness protection: Yeah, the rich get richer and everybody else is farked.
Obama doesn't care about the idiots supporting him.


Shouldn't you be off somewhere begging for the trickle-down?
 
2013-02-13 09:30:26 AM  

miss diminutive: Can someone explain to me how an index that tracks the stock value of 30 large companies represents the economic well-being of the vast majority of Americans?


It doesn't, but as NFA noted lots of middle-class folks currently working or retired have money in mutual funds that own stock in those 300 comopanies. My own parents' retirement accounts are doing a lot better now than they were four or five years ago.
 
2013-02-13 10:48:38 AM  

give me doughnuts: miss diminutive: Can someone explain to me how an index that tracks the stock value of 30 large companies represents the economic well-being of the vast majority of Americans?

It doesn't, but as NFA noted lots of middle-class folks currently working or retired have money in mutual funds that own stock in those 300 comopanies. My own parents' retirement accounts are doing a lot better now than they were four or five years ago.


No shiat. "Four or five years ago" was 2008-2009; right when the market tanked.

The Dow was at an all time high right before it tanked then too. And people then were talking about how the President and Congress at that time was ignoring the massive number of economic problems that were building up. In about October 2008, it all came home to roost and stuff crashed. Hard.

My retirement accounts are going farkin' great right now compared to how it looked this time in 2009. But that doesn't make me think we're on a course of uninterrupted prosperity... I know too many people who are still unemployed or underemployed. I can't think we're in a comfortable spot until people get back to work. It's happening- slowly. Very farkin' slowly. Hell, the economy even contracted a bit last quarter.

IMO, the increasing Dow Index is more a reflection of the reduced buying power of the dollar than it is of any actual economic expansion.
 
2013-02-13 10:56:08 AM  

NFA: jehovahs witness protection: Yeah, the rich get richer and everybody else is farked.
Obama doesn't care about the idiots supporting him.

There are a huge number of working stiffs whose 401K or retirement is in a stock account.


I was about to say, this is good news... for my 401k.
 
2013-02-13 10:56:17 AM  

GAT_00: miss diminutive: Can someone explain to me how an index that tracks the stock value of 30 large companies represents the economic well-being of the vast majority of Americans?

It doesn't in the slightest.

And if I had any money in the stock market, I'd start shorting a whole bunch of shiat.


What would your time frame be for shorting?
 
2013-02-13 10:59:57 AM  
Dow only 200 points from all-time high. DAMN YOU, OBAMA BERNANKE

It's all about the devalued US Dollar and inflation.
 
2013-02-13 11:00:22 AM  
I kept investing in my 401K though the downturns so I'm getting a kick out of this.
 
2013-02-13 11:08:50 AM  

StrikitRich: It's all about the devalued US Dollar and inflation.


Yea. Whatever.

upload.wikimedia.org

upload.wikimedia.org
 
2013-02-13 11:10:25 AM  

StrikitRich: Dow only 200 points from all-time high. DAMN YOU, OBAMA BERNANKE

It's all about the devalued US Dollar and inflation.


Inflation is like 2% a year (the highest TIPS rate is 1.7% on a 7 year bond).  Compounded over 4 years that's 8%.  The Dow is up something like 80%.  How could Uncle Ben's Magic Money Printing Press account for the other 72% of valuation increase?

If you want to go the Uncle Ben route then a much simpler explanation is that Dow components became oversold in 2009 and interest rates have fallen to a point such that the only place to get a return is in equities.  This is compounded by shrinking bond yields which drive more people into equities (in addition to indicating that inflation is becoming less of a concern for bond traders).

None of this fits into the permabear mindset though so I doubt Occam's Razor will be popular with that crowd.
 
2013-02-13 11:15:37 AM  

GAT_00: miss diminutive: Can someone explain to me how an index that tracks the stock value of 30 large companies represents the economic well-being of the vast majority of Americans?

It doesn't in the slightest.

And if I had any money in the stock market, I'd start shorting a whole bunch of shiat.


Do you need to have money in the market to short stocks?  I thought shorting was when you sold a stock that you don't own with a promise to buy it later and give it to the person you sold it to. Or is that an option? Or is it a put?

Regardless, I have all my money in Beanie Babies and tulip bulbs.
 
2013-02-13 11:18:24 AM  

Tricky Chicken: GAT_00: miss diminutive: Can someone explain to me how an index that tracks the stock value of 30 large companies represents the economic well-being of the vast majority of Americans?

It doesn't in the slightest.

And if I had any money in the stock market, I'd start shorting a whole bunch of shiat.

Do you need to have money in the market to short stocks?  I thought shorting was when you sold a stock that you don't own with a promise to buy it later and give it to the person you sold it to. Or is that an option? Or is it a put?

Regardless, I have all my money in Beanie Babies and tulip bulbs.


You have to have collateral funds in place to short. If it turns out you made a bad bet, you owe people money, so you have to have funds in place to cover the bet.
 
2013-02-13 11:20:11 AM  

Tricky Chicken: GAT_00: miss diminutive: Can someone explain to me how an index that tracks the stock value of 30 large companies represents the economic well-being of the vast majority of Americans?

It doesn't in the slightest.

And if I had any money in the stock market, I'd start shorting a whole bunch of shiat.

Do you need to have money in the market to short stocks?  I thought shorting was when you sold a stock that you don't own with a promise to buy it later and give it to the person you sold it to. Or is that an option? Or is it a put?

Regardless, I have all my money in Beanie Babies and tulip bulbs.


You are correct. it appears GAT_00 believes the market is overvalued and believes he could make money betting on price declines.
 
2013-02-13 11:20:14 AM  

BKITU: Tricky Chicken: GAT_00: miss diminutive: Can someone explain to me how an index that tracks the stock value of 30 large companies represents the economic well-being of the vast majority of Americans?

It doesn't in the slightest.

And if I had any money in the stock market, I'd start shorting a whole bunch of shiat.

Do you need to have money in the market to short stocks?  I thought shorting was when you sold a stock that you don't own with a promise to buy it later and give it to the person you sold it to. Or is that an option? Or is it a put?

Regardless, I have all my money in Beanie Babies and tulip bulbs.

You have to have collateral funds in place to short. If it turns out you made a bad bet, you owe people money, so you have to have funds in place to cover the bet.


How is a short different from an option or a put?
 
2013-02-13 11:23:51 AM  

Tricky Chicken: BKITU: Tricky Chicken: GAT_00: miss diminutive: Can someone explain to me how an index that tracks the stock value of 30 large companies represents the economic well-being of the vast majority of Americans?

It doesn't in the slightest.

And if I had any money in the stock market, I'd start shorting a whole bunch of shiat.

Do you need to have money in the market to short stocks?  I thought shorting was when you sold a stock that you don't own with a promise to buy it later and give it to the person you sold it to. Or is that an option? Or is it a put?

Regardless, I have all my money in Beanie Babies and tulip bulbs.

You have to have collateral funds in place to short. If it turns out you made a bad bet, you owe people money, so you have to have funds in place to cover the bet.

How is a short different from an option or a put?


The first one has to do with relative height, the second with various choices one can make, and the third with a big ball of iron at the Olympics.
 
2013-02-13 11:23:56 AM  
hmmm... maybe this has something to do with the 20 trillion dollars the Fed pumped into the banks in 2007-2009.  Think much?
 
2013-02-13 11:27:46 AM  

Tricky Chicken: BKITU: Tricky Chicken: GAT_00: miss diminutive: Can someone explain to me how an index that tracks the stock value of 30 large companies represents the economic well-being of the vast majority of Americans?

It doesn't in the slightest.

And if I had any money in the stock market, I'd start shorting a whole bunch of shiat.

Do you need to have money in the market to short stocks?  I thought shorting was when you sold a stock that you don't own with a promise to buy it later and give it to the person you sold it to. Or is that an option? Or is it a put?

Regardless, I have all my money in Beanie Babies and tulip bulbs.

You have to have collateral funds in place to short. If it turns out you made a bad bet, you owe people money, so you have to have funds in place to cover the bet.

How is a short different from an option or a put?


A put is a type of option - an option to sell.  When people say "option" they're generally referring to call options - an option to buy.  When someone tells you they've got company stock options that's probably a call option.

A short is not an option because it's a specific bet whereas a put option (essentially a short option) can just be let to expire.

Personally, I don't short because I've learned that the market can stay irrational longer than I can stay solvent.
 
2013-02-13 11:33:05 AM  

Rapmaster2000: StrikitRich: Dow only 200 points from all-time high. DAMN YOU, OBAMA BERNANKE

It's all about the devalued US Dollar and inflation.

Inflation is like 2% a year (the highest TIPS rate is 1.7% on a 7 year bond).  Compounded over 4 years that's 8%.  The Dow is up something like 80%.  How could Uncle Ben's Magic Money Printing Press account for the other 72% of valuation increase?

If you want to go the Uncle Ben route then a much simpler explanation is that Dow components became oversold in 2009 and interest rates have fallen to a point such that the only place to get a return is in equities.  This is compounded by shrinking bond yields which drive more people into equities (in addition to indicating that inflation is becoming less of a concern for bond traders).

None of this fits into the permabear mindset though so I doubt Occam's Razor will be popular with that crowd.


If AIG failed, along with JP Morgan, Citi, GM,etc. the DOW might not be as high.
 
2013-02-13 11:36:37 AM  
mcreadyblue:

If AIG failed, along with JP Morgan, Citi, GM,etc. the DOW might not be as high.

Only JP Morgan is a Dow component so I'm not sure I follow.

Are you trying to say is that if those firms were wiped out then the economy would be in even worse shape such that the DJIA would be lower?
 
2013-02-13 11:39:33 AM  
I'm still trying to understand the formula that tells whether to credit/blame the President and his party, or whether to credit the party that most recently gained the most seats in the Senate or House.  Not being a Demcrat or a Republican makes this task a little more difficult.  Is it still even appropriate to be saying  "where are the jobs Republicans" or did that end in 2012, or earlier?  This is complicated stuff here.  I know the formula requires knowing what party you want to support or blame, but I lose it shortly after that.
 
2013-02-13 11:41:15 AM  

Tricky Chicken: BKITU: Tricky Chicken: GAT_00: miss diminutive: Can someone explain to me how an index that tracks the stock value of 30 large companies represents the economic well-being of the vast majority of Americans?

It doesn't in the slightest.

And if I had any money in the stock market, I'd start shorting a whole bunch of shiat.

Do you need to have money in the market to short stocks?  I thought shorting was when you sold a stock that you don't own with a promise to buy it later and give it to the person you sold it to. Or is that an option? Or is it a put?

Regardless, I have all my money in Beanie Babies and tulip bulbs.

You have to have collateral funds in place to short. If it turns out you made a bad bet, you owe people money, so you have to have funds in place to cover the bet.

How is a short different from an option or a put?


Options are just that. A person placing the option pays a fee to have the option of purchase (call) or sell (put) a security at an agreed upon price at an agreed upon time.

An investor places a call option to buy 100 shares of stock A for $10 per share in 30 days and pays a fee. The investor is betting that the stock will be more valuable than $10 in 30 days. If in 30 days the stock is trading at $13 per share, the option is exercised and the investor gets to purchase $1300 worth of stock A for only $1000, $300 profit minus the option fee. If the stock is trading less than $10 per share, the investor does not exercise the option and is only out the fee.

An investor places a put option to sell 100 shares of stock A for $10 per share in 30 days and pays a fee. The investor is betting that the stock will be more less than $10 in 30 days. If in 30 days the stock is trading at $13 per share, the investor does not exercise the option because he can sell it at the current trading price while only out the option fee. If the stock is trading less than $10 per share, the investor exercises the option and gets to sell the stock for more than the current trading price.
 
2013-02-13 11:42:17 AM  

jehovahs witness protection: Yeah, the rich get richer and everybody else is farked.
Obama doesn't care about the idiots supporting him.


www.chinasmack.com

Keep on f*cking!
 
2013-02-13 11:47:10 AM  

Big_Fat_Liar: I'm still trying to understand the formula that tells whether to credit/blame the President and his party, or whether to credit the party that most recently gained the most seats in the Senate or House.  Not being a Demcrat or a Republican makes this task a little more difficult.  Is it still even appropriate to be saying  "where are the jobs Republicans" or did that end in 2012, or earlier?  This is complicated stuff here.  I know the formula requires knowing what party you want to support or blame, but I lose it shortly after that.


It's never the President and little of the Congress, but no American will accept this so why should politicians admit it?

This is par for pretty much any executive.  Listen to any earnings call and you'll hear that either growth was caused by my leadership or that losses were caused by the economy.  Whenever a restaurant closes the owner always says that it was because of the economy.  It's entirely natural.

blogs.thetimes-tribune.com

If gas prices go lower under Obama then he might as well take the credit.  When they go up he gets the blame so I consider it fair turn.
 
2013-02-13 11:49:56 AM  

max_pooper: Tricky Chicken: GAT_00: miss diminutive: Can someone explain to me how an index that tracks the stock value of 30 large companies represents the economic well-being of the vast majority of Americans?

It doesn't in the slightest.

And if I had any money in the stock market, I'd start shorting a whole bunch of shiat.

Do you need to have money in the market to short stocks?  I thought shorting was when you sold a stock that you don't own with a promise to buy it later and give it to the person you sold it to. Or is that an option? Or is it a put?

Regardless, I have all my money in Beanie Babies and tulip bulbs.

You are correct. it appears GAT_00 believes the market is overvalued and believes he could make money betting on price declines.


That is exactly what I expect.  It's a pretty safe bet I would think, if I had the money to cover it.  I don't think the economy warrants all time stock highs.  So I expect sellers to come out eventually.

That being said, I wouldn't have a clue what to short.  Stocks are not something I'm good at.  In fact, I'm quite good at having the exact opposite of my predictions happen.
 
2013-02-13 11:53:03 AM  
Yes the DOW is near an all time high, but those numbers do not mean unemployment is low and the number of people on Welfare is lower, the numbers simply mean the rich are getting richer.
 
2013-02-13 11:59:43 AM  
GAT_00:

That is exactly what I expect.  It's a pretty safe bet I would think, if I had the money to cover it.  I don't think the economy warrants all time stock highs.  So I expect sellers to come out eventually.

That being said, I wouldn't have a clue what to short.  Stocks are not something I'm good at.  In fact, I'm quite good at having the exact opposite of my predictions happen.


I've never been accurate on my "mental" shorts so I don't make actual shorts.  I have no illusions of hitting an easy stock jackpot so even when I feel things are overvalued I just play it really, really long.

I don't feel overvaluation right now.  P/E on the Dow is something like 15 and change compared to 14 and change last year.  The market seems to be taking small steps forward, waiting, and taking small steps again.  When it starts taking big steps I'll get worried.
 
2013-02-13 12:02:43 PM  

wombatsrus: I kept investing in my 401K though the downturns so I'm getting a kick out of this.


Exactly, I've been making a *killing* over the past 4 years - and started my accounts 5 years ago. Averaging 17% to 26% annual returns on my retirement accounts. Even if we return to historically standard ~5% annual returns tomorrow, I'll be able to retire a couple years early.

NFA: jehovahs witness protection: Yeah, the rich get richer and everybody else is farked.
Obama doesn't care about the idiots supporting him.

There are a huge number of working stiffs whose 401K or retirement is in a stock account.


One out of 5 Americans have a 401K account. Once you remove kids (73 million), stay-at-home parents (48 million), and the current elderly (43 million, as they are much more likely to have a pension) - In 2006, 51-million workers had a 401K; which accounts for 1/3rd of all working adults.
 
2013-02-13 12:08:41 PM  
MrSteve007:

There are a huge number of working stiffs whose 401K or retirement is in a stock account.

One out of 5 Americans have a 401K account. Once you remove kids (73 million), stay-at-home parents (48 million), and the current elderly (43 million, as they are much more likely to have a pension) - In 2006, 51-million workers had a 401K; which accounts for 1/3rd of all working adults.


Not including non-profit employees with 403bs, public employees with pensions, business owners with IRAs, and educational institutions with endowments.

Cheer up, people.
 
2013-02-13 12:13:38 PM  

max_pooper: Tricky Chicken: BKITU: Tricky Chicken: GAT_00: miss diminutive: Can someone explain to me how an index that tracks the stock value of 30 large companies represents the economic well-being of the vast majority of Americans?

It doesn't in the slightest.

And if I had any money in the stock market, I'd start shorting a whole bunch of shiat.

Do you need to have money in the market to short stocks?  I thought shorting was when you sold a stock that you don't own with a promise to buy it later and give it to the person you sold it to. Or is that an option? Or is it a put?

Regardless, I have all my money in Beanie Babies and tulip bulbs.

You have to have collateral funds in place to short. If it turns out you made a bad bet, you owe people money, so you have to have funds in place to cover the bet.

How is a short different from an option or a put?

Options are just that. A person placing the option pays a fee to have the option of purchase (call) or sell (put) a security at an agreed upon price at an agreed upon time.

An investor places a call option to buy 100 shares of stock A for $10 per share in 30 days and pays a fee. The investor is betting that the stock will be more valuable than $10 in 30 days. If in 30 days the stock is trading at $13 per share, the option is exercised and the investor gets to purchase $1300 worth of stock A for only $1000, $300 profit minus the option fee. If the stock is trading less than $10 per share, the investor does not exercise the option and is only out the fee.

An investor places a put option to sell 100 shares of stock A for $10 per share in 30 days and pays a fee. The investor is betting that the stock will be more less than $10 in 30 days. If in 30 days the stock is trading at $13 per share, the investor does not exercise the option because he can sell it at the current trading price while only out the option fee. If the stock is trading less than $10 per share, the investor exercises the option and gets to sell the stock for ...


Ok, so for an option, you are gambling on the difference in future stock price?  If I plase a put option for $10 in 30 days as above on the 100 shares, and the value at the end is $5, I can sell the $500 worth of shares for $1,000.

Where is the extra $500 in cash coming from?  Why would anybody pay me $1,000 for stock they can buy on the open market for $500?

Also, how is this similar/different from a short?

/Why yes I do get my investing advice/information from Fark threads
//Is this a risky practice?
///should I not do that?
 
2013-02-13 12:19:56 PM  

Vegan Meat Popsicle: StrikitRich: It's all about the devalued US Dollar and inflation.

Yea. Whatever.


www.shadowstats.com

The CPI chart on the home page reflects our estimate of inflation for today as if it were calculated the same way it was in 1990. The CPI on the Alternate Data Series tab here reflects the CPI as if it were calculated using the methodologies in place in 1980. In general terms, methodological shifts in government reporting have depressed reported inflation, moving the concept of the CPI away from being a measure of the cost of living needed to maintain a constant standard of living.

 
Kind of hard to calculate real inflation when you don't include food and energy.
 
2013-02-13 12:23:56 PM  

StrikitRich: Vegan Meat Popsicle: StrikitRich: It's all about the devalued US Dollar and inflation.

Yea. Whatever.

[www.shadowstats.com image 500x320]

The CPI chart on the home page reflects our estimate of inflation for today as if it were calculated the same way it was in 1990. The CPI on the Alternate Data Series tab here reflects the CPI as if it were calculated using the methodologies in place in 1980. In general terms, methodological shifts in government reporting have depressed reported inflation, moving the concept of the CPI away from being a measure of the cost of living needed to maintain a constant standard of living.
 
Kind of hard to calculate real inflation when you don't include food and energy.


That's because there's no such thing as REAL inflation.  There is inflation and CPI.

Regardless, how does increased costs of food and energy cause the market to rise?  If anything, people spending more on necessities have less to spend on equities.

Maybe you should stop reading zerohedge.
 
2013-02-13 12:32:58 PM  

Tricky Chicken: max_pooper: Tricky Chicken: BKITU: Tricky Chicken: GAT_00: miss diminutive: Can someone explain to me how an index that tracks the stock value of 30 large companies represents the economic well-being of the vast majority of Americans?

It doesn't in the slightest.

And if I had any money in the stock market, I'd start shorting a whole bunch of shiat.

Do you need to have money in the market to short stocks?  I thought shorting was when you sold a stock that you don't own with a promise to buy it later and give it to the person you sold it to. Or is that an option? Or is it a put?

Regardless, I have all my money in Beanie Babies and tulip bulbs.

You have to have collateral funds in place to short. If it turns out you made a bad bet, you owe people money, so you have to have funds in place to cover the bet.

How is a short different from an option or a put?

Options are just that. A person placing the option pays a fee to have the option of purchase (call) or sell (put) a security at an agreed upon price at an agreed upon time.

An investor places a call option to buy 100 shares of stock A for $10 per share in 30 days and pays a fee. The investor is betting that the stock will be more valuable than $10 in 30 days. If in 30 days the stock is trading at $13 per share, the option is exercised and the investor gets to purchase $1300 worth of stock A for only $1000, $300 profit minus the option fee. If the stock is trading less than $10 per share, the investor does not exercise the option and is only out the fee.

An investor places a put option to sell 100 shares of stock A for $10 per share in 30 days and pays a fee. The investor is betting that the stock will be more less than $10 in 30 days. If in 30 days the stock is trading at $13 per share, the investor does not exercise the option because he can sell it at the current trading price while only out the option fee. If the stock is trading less than $10 per share, the investor exercises the option and gets to sell th ...


Ok, so for an option, you are gambling on the difference in future stock price?  If I plase a put option for $10 in 30 days as above on the 100 shares, and the value at the end is $5, I can sell the $500 worth of shares for $1,000.
Where is the extra $500 in cash coming from?  Why would anybody pay me $1,000 for stock they can buy on the open market for $500?
Also, how is this similar/different from a short?
/Why yes I do get my investing advice/information from Fark threads
//Is this a risky practice?
///should I not do that?


$500 is coming from the person that sold the option. It's gambling. The buyer of the option is making a bet the stock price will move one way and the seller is making a bet the stock price will move another way. They have to pay $1000 because that was the price agreed upon when the option was placed. The seller of the option was betting the price would be lower and the option would not be exercised and they would walk with the fee.

Options are similar to be betting the over/under on a football game. A gambler is betting on whether or not he believes the game will be higher or lower scoring than the house believes. With options, an investor is betting on the price going higher or lower than the seller of the option.

In a short, the investor "borrows" a stock to sell and has to "pay" the stock back at an agree upon date. If an investor thinks the value will go down, he "borrows" 100 shares of Stock A for 30 days and sells them at the market rate of $10. After 30 days, if the stock has gone down to $8, he gets to purchase the stocks to "pay back" at a lower prices than he purchased them: $200 profit. If the stock went up to $13 he has to purchase the stocks to "pay back" at a higher rate: $300 loss.
 
2013-02-13 12:36:03 PM  
Tricky Chicken: max_pooper: Tricky Chicken: BKITU: Tricky Chicken: GAT_00: miss diminutive: Can someone explain to me how an index that tracks the stock value of 30 large companies represents the economic well-being of the vast majority of Americans?

It doesn't in the slightest.

And if I had any money in the stock market, I'd start shorting a whole bunch of shiat.

Do you need to have money in the market to short stocks?  I thought shorting was when you sold a stock that you don't own with a promise to buy it later and give it to the person you sold it to. Or is that an option? Or is it a put?

Regardless, I have all my money in Beanie Babies and tulip bulbs.

You have to have collateral funds in place to short. If it turns out you made a bad bet, you owe people money, so you have to have funds in place to cover the bet.

How is a short different from an option or a put?

Options are just that. A person placing the option pays a fee to have the option of purchase (call) or sell (put) a security at an agreed upon price at an agreed upon time.

An investor places a call option to buy 100 shares of stock A for $10 per share in 30 days and pays a fee. The investor is betting that the stock will be more valuable than $10 in 30 days. If in 30 days the stock is trading at $13 per share, the option is exercised and the investor gets to purchase $1300 worth of stock A for only $1000, $300 profit minus the option fee. If the stock is trading less than $10 per share, the investor does not exercise the option and is only out the fee.

An investor places a put option to sell 100 shares of stock A for $10 per share in 30 days and pays a fee. The investor is betting that the stock will be more less than $10 in 30 days. If in 30 days the stock is trading at $13 per share, the investor does not exercise the option because he can sell it at the current trading price while only out the option fee. If the stock is trading less than $10 per share, the investor exercises the option and gets to sell th ...


Ok, so for an option, you are gambling on the difference in future stock price?  If I plase a put option for $10 in 30 days as above on the 100 shares, and the value at the end is $5, I can sell the $500 worth of shares for $1,000.
Where is the extra $500 in cash coming from?  Why would anybody pay me $1,000 for stock they can buy on the open market for $500?
Also, how is this similar/different from a short?
/Why yes I do get my investing advice/information from Fark threads
//Is this a risky practice?
///should I not do that?


$500 is coming from the person that sold the option. It's gambling. The buyer of the option is making a bet the stock price will move one way and the seller is making a bet the stock price will move another way. They have to pay $1000 because that was the price agreed upon when the option was placed. The seller of the option was betting the price would be lower and the option would not be exercised and they would walk with the fee.

Options are similar to be betting the over/under on a football game. A gambler is betting on whether or not he believes the game will be higher or lower scoring than the house believes. With options, an investor is betting on the price going higher or lower than the seller of the option.

In a short, the investor "borrows" a stock to sell and has to "pay" the stock back at an agree upon date. If an investor thinks the value will go down, he "borrows" 100 shares of Stock A for 30 days and sells them at the market rate of $10. After 30 days, if the stock has gone down to $8, he gets to purchase the stocks to "pay back" at a lower prices than he purchased sold them: $200 profit. If the stock went up to $13 he has to purchase the stocks to "pay back" at a higher rate: $300 loss.

Oops
 
2013-02-13 12:47:00 PM  
max_pooper:

$500 is coming from the person that sold the option. It's gambling. The buyer of the option is making a bet the stock price will move one way and the seller is making a bet the stock price will move another way. They have to pay $1000 because that was the price agreed upon when the option was placed. The seller of the option was betting the price would be lower and the option would not be exercised and they would walk with the fee.

Options are similar to be betting the over/under on a football game. A gambler is betting on whether or not he believes the game will be higher or lower scoring than the house believes. With options, an investor is betting on the price going higher or lower than the seller of the option.

In a short, the investor "borrows" a stock to sell and has to "pay" the stock back at an agree upon date. If an investor thinks the value will go down, he "borrows" 100 shares of Stock A for 30 days and sells them at the market rate of $10. After 30 days, if the stock has gone down to $8, he gets to purchase the stocks to "pay back" at a lower prices than he sold them: $200 profit. If the stock went up to $13 he has to purchase the stocks to "pay back" at a higher rate: $300 loss.



So In an Option I have to already own the stock and I gamble on its up or down movement?

But on a short I am buying a stock while simultaneously gambling on its future movement?
 
2013-02-13 12:47:29 PM  

miss diminutive: Can someone explain to me how an index that tracks the stock value of 30 large companies represents the economic well-being of the vast majority of Americans?


Its doesn't. It represents the well-being of people who matter.

Deal with it, Pleb.
 
2013-02-13 12:51:03 PM  

GAT_00: And if I had any money in the stock market, I'd start shorting a whole bunch of shiat.


As the market has shown time and again, it can stay irrational a lot longer than you can stay solvent.
 
2013-02-13 01:04:51 PM  

wombatsrus: I kept investing in my 401K though the downturns so I'm getting a kick out of this.


You air, are doing it right. Dollar cost averaging for the win. Most people get emotional in upswings and downswings and do everything exactly backwards. They want to get in at the top after the good money has been made already and they get depressed in down markets and reduce their contributions or quit. So they miss out on accumulating shares when they are cheap and then miss the party when the market swings back up again.
 
2013-02-13 01:08:13 PM  

Tricky Chicken: max_pooper:

$500 is coming from the person that sold the option. It's gambling. The buyer of the option is making a bet the stock price will move one way and the seller is making a bet the stock price will move another way. They have to pay $1000 because that was the price agreed upon when the option was placed. The seller of the option was betting the price would be lower and the option would not be exercised and they would walk with the fee.

Options are similar to be betting the over/under on a football game. A gambler is betting on whether or not he believes the game will be higher or lower scoring than the house believes. With options, an investor is betting on the price going higher or lower than the seller of the option.

In a short, the investor "borrows" a stock to sell and has to "pay" the stock back at an agree upon date. If an investor thinks the value will go down, he "borrows" 100 shares of Stock A for 30 days and sells them at the market rate of $10. After 30 days, if the stock has gone down to $8, he gets to purchase the stocks to "pay back" at a lower prices than he sold them: $200 profit. If the stock went up to $13 he has to purchase the stocks to "pay back" at a higher rate: $300 loss.


So In an Option I have to already own the stock and I gamble on its up or down movement?

But on a short I am buying a stock while simultaneously gambling on its future movement?


An option can be either to purchase (a call) or to sell (a put).

In a short, you never really own the stock. You "sell" the stock before "buying" it. When the transaction is complete you do not own the stock. If you think the price will go down, you "sell" a stock at the current price and then "buy" later it at a lower price. It's the same old "buy low, sell high" except the the sequence of events is backwards.

There is no limit to the potential loss in a short. If you are betting the stock goes down and there is no theoretical limit on how high it can go. Let's say there is some crazy stock that you short at $10. You sell the stock for $10 per share and then 29 days later the company announces it has developed a miracle drug that cures cancer, diabetes, MS, MD, heart disease, and impotence in a single low cost pill and the price sky rockets to $1000 per share. At 30 days you have to buy the stock at $1000 to "pay back". Usually other securities have to be put up as collateral in order to place a short.
 
2013-02-13 01:20:57 PM  

lc6529: Yes the DOW is near an all time high, but those numbers do not mean unemployment is low and the number of people on Welfare is lower, the numbers simply mean the rich are getting richer.


Actually, the market is at near all-time highs because for the past 5 years businesses have been investing in productivity gains rather than rehiring the employees they shed during the recession. As a result, corporate profits are near all-time highs and they will never rehire those dead weightsworkers, so share prices are up.

After all, machines don't join unions, call in sick, demand benefits and a retirement system, and so on. They just print money.
 
2013-02-13 01:27:44 PM  
Stone Meadow:After all, machines don't join unions, call in sick, demand benefits and a retirement system, and so on. They just print money.

I bet if we started replacing the CEO's with machines they would start declaring how unfair it was to automate everything.....
 
2013-02-13 01:32:14 PM  

Stone Meadow: lc6529: Yes the DOW is near an all time high, but those numbers do not mean unemployment is low and the number of people on Welfare is lower, the numbers simply mean the rich are getting richer.

Actually, the market is at near all-time highs because for the past 5 years businesses have been investing in productivity gains rather than rehiring the employees they shed during the recession. As a result, corporate profits are near all-time highs and they will never rehire those dead weightsworkers, so share prices are up.

After all, machines don't join unions, call in sick, demand benefits and a retirement system, and so on. They just print money.


No, but overworked employees will soon realize they know longer need to be grateful they have a job and will demand higher pay or will get better job. Wage depression and work load will ease as the job market becomes more competitive.
 
2013-02-13 01:45:46 PM  
I'm just glad I could take another salary freeze this year in order to bolster my employer's portfolio.  I love capitalism!
 
2013-02-13 02:30:45 PM  

max_pooper: Tricky Chicken: max_pooper:


There is no limit to the potential loss in a short. If you are betting the stock goes down and there is no theoretical limit on how high it can go. Let's say there is some crazy stock that you short at $10. You sell the stock for $10 per share and then 29 days later the company announces it has developed a miracle drug that cures cancer, diabetes, MS, MD, heart disease, and impotence in a single low cost pill and the price sky rockets to $1000 per share. At 30 days you have to buy the stock at $1000 to "pay back". Usually other securities have to be put up as collateral in order to place a short.

You know something don't you...Which pharmaceutical company do you work for ane when is this drug coming out?

You probably can't answer that legally. So let me guess...
the name max_pooper implies that you devellop laxatives...
Philips is milk of magnesia and that has been around forever...
You probably work in the fiber realm since it is most recently booming...
The best fiber comes from plants...
Plants love the sun....
Austrailia is a great place for sun...
Austrailia is entirely peopled by criminals...
Criminals are uesd to people not trusting them...
You obviously developed a miracle cure from Iocane powder!!
 
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