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A SVB short seller explains red flags he saw months ago

fortune.com

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Re: A SVB short seller explains red flags he saw months ago

#31

Post by jpdb »

scscsc wrote: post #28

Could anyone in the know explain how "shorting" works?

A simple explanation is that you borrow a certain number of stocks, sell it, and re-buy at some point in the future (at a lower price hopefully) to return the number of stocks you borrowed.

Imagine you think widgets that are worth $1 today are going to be worth $0.50 tomorrow. You say to me, "Hey jpdb, can I borrow 100 widgets and give them back to you tomorrow?" I say sure and you turn around and sell those widgets. Tomorrow, we meet up and you take your $100 and buy 100 widgets for the new price of $0.50 each. You return the 100 widgets you borrowed and you now have $50 in your pocket. In this example you have "shorted" widgets.

Re: A SVB short seller explains red flags he saw months ago

#32

Post by settrans »

scscsc wrote: post #28

Could anyone in the know explain how "shorting" works?

Short selling on its own is trading on the hope that a stock goes down by borrowing shares from someone who owns them and immediately selling them. Your broker will match you to an owner who is willing to lend the shares if there are any available. To exit the trade, you buy back the shares you borrowed.

Your profit from this trade is the stock's price when you entered the trade minus the price when you buy it back (i.e. you want to sell high and then buy low), less any financing costs from borrowing the shares.

Re: A SVB short seller explains red flags he saw months ago

#33

Post by kqr »

3np wrote: post #23
croes wrote: post #22

Isn't it some kind of survivorship bias to ask the winners of such bets afterwards?

Yes. Their reasoning can still be interesting.

But is it more interesting than the reasoning of the losers? I'm tempted to say the losers' reasoning is more interesting.

A winner's reasoning could be completely unrelated to the event at hand and we'd never know the difference. A loser's reasoning is definitely wrong in some way, so we can learn something from it.

Re: A SVB short seller explains red flags he saw months ago

#34

Post by arez »

didgetmaster wrote: post #12
silisili wrote: post #10

Earlier quoted context omitted.

It specifically says at the end they refuse to give the amount. Given the research involved, and a well known firm, I'm sure it wasn't pocket change.

They might have bet a million dollars on it, but if their normal short position is also around a million dollars, then I am not as impressed. If they wanted to show everyone how smart they were, I expected a quote something like: "We were so confident in our analysis that we invested 10x our normal short position in it!"

it's not about being smart or anything, they just explain how they figured it out, doesn't matter how much money they made, that's just focusing on the wrong things

Re: A SVB short seller explains red flags he saw months ago

#35

Post by diggum »

scscsc wrote: post #28

Could anyone in the know explain how "shorting" works?

A short seller borrows shares from a shareholder - a bank, institutional investment group, or an individual who makes them available in return for interest payments - and sells them on the market at the current price. They hope to return the shares by buying them back at a lower price later and pocketing the difference.

Re: A SVB short seller explains red flags he saw months ago

#36

Post by gpvos »

windowshopping wrote: post #21

Just wondering, why do posts like this consistently have an unpaywalled archive link as the top comment, and it's unreply-able? It almost seems automated except it's a different commenter every time. Is there some system detecting those comments and floating them to the top, then disabling replies? ( @dang )

I guess comments consisting only of a link are automatically set to be unreplyable? The posting and the floating to the top is just the normal posting and voting system, it seems to me.

Re: A SVB short seller explains red flags he saw months ago

#37

Post by dvt »

scscsc wrote: post #28

Could anyone in the know explain how "shorting" works?

The answers here are great, but I would also direct you to a more complete picture here: https://www.investopedia.com/terms/s/shortselling.asp

Shoring is, financially-speaking, quite complicated and can be very opaque. It's also fundamentally different than longing (not merely the "opposite").

Re: A SVB short seller explains red flags he saw months ago

#40

Post by JackFr »

scscsc wrote: post #28

Could anyone in the know explain how "shorting" works?

You literally borrow someone else’s stock and sell it. You now owe them the stock which effectively leaves you with a negative position. Eventually you have give them the stock back which will require you to buy it. If the price has gone down you make money.
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