Stock question?

Question

How does someone make money when the stock goes down... This just doesn't make sense to me...

Answer 1

Phil ... if you "short" a stock and it goes down, you make money.  Weird, eh?  Trust me, it is not for the faint of heart, AND it takes a bit of practice to get it right.

In this market, you almost have to "short" to make any money.  Sooo ... check out ProShares Short ETFs.  It does the "shorting" job for you.  All you do it buy a "short" ETF and it goes up if the sector that you are shorting goes down.  

If that seems confusing ... think what the market has done with financials for the past few days.  The financials have gone up, right?  What happened to them today?  They fell.  Keep that trend in mind and then look at a two week chart of the ETF "SKF". which shorts financials.  Another one is "DUG"  It shorts energy and is the opposite of the ETF "DIG."  No, I am not making this up ...

Check them out, but proceed with caution.  I've made money shorting with ETFs and I've lost, too.  Shorting a stock is more "to the point", but if you don't have time to learn a new trading skill, short with an ETF.  I wish you luck!  

Uppity Wench

Answer 2

You can do so with shorts and various option strategies.

Basically average stock return distributions have a fairly negative skew. So if you look at the market as a giant casino, the downside bets have the edge. Hence some hedge funds exist to make only downside bets.

Hope that helped!

Answer 3

http://www.investopedia.com/university/s...

Answer 4

There are two basic ways to make money investing in stocks.  The most common way is to buy the stock and hope it goes up.  The least common way is to short (just terminology identifying your trade) a stock in hopes it goes down.  In shorting, you sell shares and then use a buy order later if the stock goes down to close the trade.  The majority of the time, most short sales are naked shorts.  Naked shorts are borrowing shares you don't actually own to iniate the trade.  You never actually acquire the shares later when you buy.  It's just the way to close or exit the trade.

Answer 5

By taking the opposite side of the trade.

Normal investment is buy, then sell.

Short sellers sell borrowed stock, then hope it will go lower so they can buy it back at a lower price than which they "sold" it, then "returning" the borrowed stock to the account which lended it.

Answer 6

Bu short selling the stock...Of course if there are shares available to short sell for that particular stock...You borrow the shares from a broker you short sell it and then when the price goes down you buy it back and give the shares back to that broker! there are two buttons on your brokage account when you can short sell the stocks! it is just the reverse of buying long!

Answer 7

There are actually a number of ways. Truth be told, making money in a bear market is a whole lot faster. Ill just run through a few of the ways to help get your started.

You can short sell the stock. Basically you Sell first, then buy back later. For instance, Sell at $10 and if the stock falls to $8, buy it back. You profited $2.

You can use options, and this get long.

Buy Put Options: The value of the Put Option rises as the stock value falls.

Sell Covered/Naked Call Options: If you own a stock and think that its going to fall in price, you can sell calls. This, contrary to belief is closer to short selling stock than buying Put Options is; in that you sell high and buy back low.

Naked Calls is when you sell a covered call without owning the stock. Very risky and advise you to not use this method.

If you dont know options, I highly suggest educating yourself first.

Last, own companies with a high dividend pay out.

I hope this helps. If not, Please contact me.

Christian Nago

CEO & Chief Investment Officer

http://www.intrepidtradings.com