"CLIFFORD ILKAY" <clifford_ilkay-biY6FKoJMRdBDgjK7y7TUQ at public.gmane.org> on Monday, December 08, 2003 6:44 PM wrote:
At 17:33 08/12/2003 -0500, David J Patrick wrote:
JoeHill wrote: [snip]
I think it's a good time to start selling any SCO stock you own... [snip] That begs the question; are there any investment wizards in the group who know how to "short" a stock and, thus" reap the reward for predicting SCOs (and soon enough M$s) swan dive ?
Shorting a stock is not difficult or require great financial wizardry. You just issue a sell order with your broker without owning any stock. Your broker in turn borrows the stock from someone who already owns it. You make money if the stock drops enough to cover your transaction costs and then some but only if you put in a buy order to negate your previous sell order. You will in all likelihood have to put up substantial margin though.
This topic has come up in places like slashdot.org. the above is as I understand things basically correct. What I gather is missing is all this is the fact that I gather SCO stock is not widely held enough to make shorting at all easy. In other words getting enough stock that you could short it would be an issue. The other point to note is that shorting places you in a situation of unlimited liability. Yes, like everyone else here (at least I hope like everyone else here) I expect that at some point soon SCO share certificates will make for good toilet paper (as that will be much they will be worth). The problem is that SCO may pull a few stunts (or get lucky (a drunk/stoned judge?)) along the way that will (for a time) cause the share price to spike up. Say for the sake of argument SCO manages to blackmail or bribe a judge in to letting them win round one, SCO share prices jump for $14 to $14,014, you expected SCO to drop to $10 by the time you had to deliver the shorted shares at $14. So on an order of 1000 shares, your out of pocket $14,000,000 instead of making $4,000. Obviously this is an extreme example, but shorting a stock is a MAJOR short term gamble on what is clearly a near certain long term event (the effective (or hopefully total) destruction of SCO). So, changing topic who here other than me has made money off SCO in the past month? I went out to the SCO City-to-City event and grabbed some free stuff, which I have in turn sold off via eBay (I've got a nice SCO T-Shirt if anyone wants to make me an offer (last one went for $51 (U.S.) on eBay)). Ok, so on a $/hour it has been a poor return, but I do take some pride in scoring a few bucks of SCO at effectively zero risk :-) .
Keep in mind a few things. First, there are people who trade stocks for a living and they have access at the very least to the same information you do. The current price for SCOX reflects their expectations. Second, another company coming along and taking SCO out might dash your dreams of becoming rich, rich, rich. Third, you have to analyze the risk/reward ratio. If the risk free yield is 3% today, you have to do much better than 3%, how much better is up to you, in order to make it worthwhile. Finally, unless you do this for a living, the odds are against you that you will make money doing this. You should avoid speculating with money that you cannot afford to lose. In other words, if you feel confident that this is a winning strategy, and you have analyzed the risk/reward ratio and determined that it is acceptable to you, and you are doing this with money you can afford to lose, by all means, go for it. Otherwise, you are just another sheep waiting to be sheared by the pros in the business.
Should we get a group thing going ?
If you feel that strongly that shorting SCOX or MSFT is a good move, why wait for anyone else? You don't need a "group" to do this.
hmmmm ? djp
Regards,
Clifford Ilkay Dinamis Corporation 3266 Yonge Street, Suite 1419 Toronto, Ontario Canada M4N 3P6
Tel: 416-410-3326
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