Hello friends, in today’s article we see chapter 19 of one up on wall street book. in chapter 19 author discuss about the new derivatives of stock market i.e. Options, Future, and Shorts Selling. So let’s start chapter 19 of one up on wall street book.
Options: Options is the financial instrument, which have ability to buy and sell in decided price, with time period, is known as options.
Options give the power to deal buy and sell at decided time frame, some time its benefited or some time is not.
Future: Future is also the financial instrument, the contract is established between buyer and seller at decided price, is known as future.
let’s take the example of former, if former want to sell his rice to the other person, so they make the deal on future price, let says, buyer say, i will buy this rice at 20 rupees per kg, whatever the price in future is show, they have to buy the rice at 20 rupees, so this is the contracts. (One Up On Wall Street: Chapter 19)
Shorts Selling: Shorts selling is the technique of selling and buying, in generaly, we are all first buy the stock and then sell the stocks, but in shorts selling, you have the power to sell stock first and buy later. so whatever you sell the stock you can get that stock from the broker. the best shorts selling in history is done in 2003 to 2007, this full detail discuss in movie, i.e The Big Shorts
So financial instrument have some merits and demerits, so future and options have some merits and demerits.
So let’s understand what are the author says, about that (One Up On Wall Street: Chapter 19)
In Short selling the down side is high or unlimited and there is no limit of lose, because they is no also no limit of stock is go up at any price and you get unlimited lose.
Author give the example of Robert Nilsson, they make the shorts in international company, that stock is 70 cents and they increase upto 70 dollar, so he get 100 bagger lose, and they lose the 20-30 millions dollar in short selling.
So be careful doing shorts selling.
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