Question about selling short and if it pays $100

Technical Support and Exchange Help

Hello, I am rather new to PPX.
I was hoping someone could please help me with a question of mine.

Say there is a proposition that, for example, a monkey will fly to the moon tomorrow. The prop will pay $100 if a monkey does fly to the moon tomorrow.

My question is, if I shorted the above theoretical stock, meaning I believe it wont happen, and then it does not happen, do I get $100 dollars for each short stock I own?

Do short stocks only pay out if the stock price goes down, or can it get the $100 like buying long stocks can do?

Sorry if this is confusing, doesnt make sense, or is in the wrong place.

Thanks!!!

4 Comments

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yo33

03/02/09 at 9:50 am

Props payout at either $100 or $0 per share. As stock prices move toward 100, long shares increase in value and shorted shares decrease in value. As prices move toward zero, it's just the oppisite.

To figure payouts, take the difference between the payout price and the price you paid for a stock. This difference is the amount per share you'd get back (or lose) in addition to your initial investment.

Using your example, if you shorted 1000 shares of the monkey stock at $70, and it paid at $0 (since it did not happen) you'd get your initial $70k back plus an additional $70k. So in this case, you actually get back $140 per share.

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arkadi

03/02/09 at 12:09 pm

Yes, yo33 is right. If you short the stock at 70 and it goes short, you get 140; if you short in at 20 then you get 40 etc. It doubles the amount you put into it.

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DMSMALL

from Beverly Hills, florida

03/02/09 at 12:23 pm

Long- agree with prop. it occurs, it pays out $100.00 a share
Short- prop will not happen you get 2 times what you paid for the stock, double your money.

ALSO if you sell early there is a o.25 fee per share. so if you want to trade before the prop ends make sure you cover the "vig" to make a profit.

You can hold a long and a short position at the same time. When you want to get out of a long position before the end you sell, but if it is a short position, you cover.

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Meisem

from Roanoke, Virginia

03/03/09 at 1:58 am

Oh okay. Now it all makes sense! Thank you all so much! All were very good answers. Thanks again!