I think the inner boy in me's been yearning for some sort of outlet to let out my competitive streak for some time now. For a while, I managed to quench it by playing poker obsessively. Since the latter part of last year, I managed to divert some of that into a sad collection of DVDs (my collection extends somewhere into the 300-400 range... it's quite pathetic, actually).

Recently, I've started playing the stock market. Day trading and cyclical trading is not my thing; I found out being a "long" (betting on the is the most comfortable role for me.

One of the interesting things I've learned about the stock market is that there is an eternal battle being waged between the "shorts" and the "longs." The "shorts" are people who sell stock they don't have; they're betting the stock will decline in value (and then they'll buy the 'borrowed' stock back). Longs are people who buy a stock and hold it.

There's something about shorts that just irks me. It's just the concept that someone is betting on the decline of a company in such a big way.

The past few days, I had been ghosting a few finance message boards to see if two of my stocks were going to do well - I had done my due diligence research before and was confident they would do well in the long term, but being a beginner, I still had my doubts.

I could not believe the number of people who were openly calling for a stock to tank so they could profit from it. It was absolutely maddening.

In any case, today I woke up and saw both of my stocks had risen greatly over the past two days (both nearly posted 9% gains in the past two days).

I then found myself immensely enjoying the fact that the shorts were getting "squeezed" (basically they were losing a crapload of money and would have to cover their losses shortly). It almost got to a point where I wanted to trash-talk some of the shorters...

What is is about us guys that brings out this ugliness?

I take immense pleasure in watching shorts get squeezed ... I gloat as they scramble to cover margin calls. That'll teach them to try to profit off the misery of others.

Posted by roy on April 19, 2006 at 07:25 AM in Finances | 8 Comments

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Comment posted on April 20th, 2006 at 09:10 AM
i compete in farting.
Comment posted on April 19th, 2006 at 10:27 PM
And by the way, it's about damn time I put a user icon up, don'tcha think?
Comment posted on April 19th, 2006 at 10:20 PM
This goes back to caveman days, when you wanted to kill a bigger wildebeest than the other alpha male in your cave. Or, like poker, when we would want to take Big Red's money just because his style seemed "wrong." (which it is, no I don't hold grudges)
Comment posted on April 19th, 2006 at 03:53 PM
Money is the root of all evil. :-)
Comment posted on April 19th, 2006 at 02:55 PM
there's another concept that companies use to hedge against losses, where they buy both short and long positions, to augment each other. for whatever you lose on a short or long position you can gain off of the other. when you're dealing with large sums of money the advantages become apparent
Comment posted on April 19th, 2006 at 06:02 PM
The net gain between the two would wipe out any change. Are you sure this is how it works? Do you know what it's called? I'd like to do some more reading on it.

I can see someone with a lot of long positions buying some put options to hedge losses, but selling a short position on your own stocks seems counterintuitive.
Comment posted on April 20th, 2006 at 11:31 AM
The only reason I can think of to short the exact same stock you're long on would be if you want to lock in a gain. For example, you want to sell a stock for a gain, but you want to put off the taxes until next year, so you could short that stock and lock your profit in until next year when you close both positions.

Otherwise, I imagine that most people would hedge using options or perhaps shorting stock of other companies in the sector (so that you're essentially betting on your company outperforming the sector rather than necessarily performing well overall).
Comment posted on April 19th, 2006 at 10:58 PM
I think you are right Roy. People do not have naked puts (short selling) to hedge losses. That defeats the very purpose.