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Comment by cft | Hacker News Reader

Can someone advise what's the best way to buy derivatives (etrade,scottstrade, etc): the fastest way to open an account, the best order execution times? I want to invest some money to short this.

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Please don't take this as snark but I wouldn't recommend shorting anything if you are so inexperienced that you don't have a trading account or don't know which one to use. Shorting stocks is extremely risky and should only be done by traders with lots of experience.

If you really want to bank on Twitter going south, you can try buying puts when they're available. If you're not sure what puts are, leave this whole idea alone.

i run a bootstrapped company that i founded in 2006, and i have some extra money i am totally comfortable of losing entirely. i view this as an experiment. i am looking for a serious practical advice.

I would still recommend against it but you should know that shorting isn't always available right after a stock IPOs. It can take about a month before its possible.

Its been a while since I've dealt with IPOs so I'm not 100% sure if that's the case anymore.

If you want to get involved, call TD Ameritrade. They can give you 100% accurate information and get you setup quickly.

But that's exactly the danger with shorting, your losses aren't capped by what you put in. A stock can only drop to 0, but it can go up to whatever -- you have no upper bound on losses. Do whatever you want, but know what you're doing.

http://www.investopedia.com/university/shortselling/shortsel...

Consider this carefully: "When you are a long a stock, the most you can lose is the amount you paid. When you are short, you can lose unlimited money."

If you have "funny money" that you aren't afraid to lose, there are safer and more responsible ways to experiment with the market than unprotected short positions.

You may want to read about and understand some options strategies: http://www.investopedia.com/terms/b/bearputspread.asp http://www.investopedia.com/terms/b/bearcallspread.asp

Either one of those strategies gives you the opportunity to profit a certain amount if the stock actually goes down (the width of the spread times the quantity), while limiting your exposure to just the premium you pay for the options. Your exposure is limited because you both buy and sell puts or calls for equal amounts of the underlying, so you have no net exposure to the price of the underlying.

A general word of advice about playing the market for short term gain: big guys make money off of little guys. You may win some, but usually you are doing damn well as a small time trader if you're batting above 500 at all.

Or you can buy puts and the most you're out is the amount you paid for the option.

If you're looking to play around with some money - basically playing a gambling game with companies - then options are a fun little game and you can manage your downside perfectly.

Again, friendly advice. This attitude guarantees that you will lose all your money. If not shorting TWTR then on the next deal. If the money is burning a hole in your pocket then give it to a worthy charity. If you are interested in the stock market then you need to read some books, discover a trading style that matches your personality and life situation, learn capital management, watch price movement until nothing surprises you and most important of all, overcome your psychological money demons (EVERYONE has them).

To add to this, just remember one simple fact: When you are a long a stock, the most you can lose is the amount you paid. When you are short, you can lose unlimited money.

I don't trade stocks, nor do I claim to know that business at all. Can you explain this concept?

A short is borrowing stock to sell, promising to re-buy that stock in the future to give back to the lender. The stock price can rise arbitrarily high, which means you may have to pay an arbitrarily high price to re-purchase the stock in the future. See "short squeeze" and read about the Volkswagen/Porsche example a couple years back.

If you buy a stock at 10 and it goes to zero (the bottom limit), all you lose is your $10. If you short a stock (thinking it's price will go down), there is no upper limit on how far it can go up. If it continues to go up, you're going to lose the amount of money at which you eventually "buy to cover". For example, if you hold your short until the price is $100, you lose $90.

Could you not hold forever?

No. As the value of the position (price times size) approaches the cash balance in your brokerage account, your broker will close out your position (buying back the shares) using the funds in your account. This is known as a "margin call."

Shorting is selling a stock you don't own. You have to purchase it back (called "covering") later. If it goes down, you keep the difference between what you sold it for and what you had to repurchase it at.

If the price goes up, though, you still have to buy it back. As a share's price technically has no upper limit, you could wind up in the situation where you sold a share for $10, intended to purchase it back at something like $5, but wind up having to purchase it back at $10,000,000/share because they accidentally invented an AI.

Do you have/Do you get to set limits on it? For example, automatically buy back if it reaches $15?

Yes that's called a stop loss order.

You could always place a purchase order to execute if the stock rises to $15.

@giarc: Shorting consists of borrowing as asset from someone to sell at the current market price and hoping it goes down in value, so you can buy it back for less that you sold it and then return the asset to its owner. In this scenario, you take the difference in price, less the premium you paid the owner for the right to borrow. To give an example, say stock A is trading at $100, but you think it is going to fall. Say you find someone who is willing to let you borrow a share of stock A for a week for the premium of $1. You agree, and then immediately sell this share back to the market for $100. You now have $99. If the stock falls, as you hope it does, say to $90, you spend $90 to repurchase the share and return it. You now earned $9 on a short.

Consider the opposite scenario: you short, but the price goes up. Again, borrowing a share of stock A for $1, trading at $100. You sell that share to the market and wait for the price to fall, so you can buy and return. But, suddenly the market learns that company A is insanely profitable in a previously unknown way, and the price of the stock skyrockets. At the end of the borrowing term, you are obligated to return a share of stock A to the person you borrowed from. How much will you have to pay to get it back? This is theoretically unlimited, depending on how high the market goes. If the market goes to $200, you have lost $101 on the short. If the market goes to $200,100 (and does not fall below this before the end of the borrowing term), you have lost $200,001 on the short.

Now imagine you have borrowed a LOT of shares on high leverage (value of what you borrow exceeds what you actually have on hand to pay it back) and you can see how shorting and being wrong can wipe you out.

Good point from svachalek[https://news.ycombinator.com/item?id=6690938] below: if the borrowed stock rises high enough, eventually the lender is going to margin call you..

http://www.investopedia.com/ask/answers/05/shortmarginrequir...

You can always short the stock, but that is quite risky as your maximum downside is theoretically infinite (the stock can always go up). A bearish options strategy[1] can at least define your risk. Thinkorswim[2] options platform is my favorite, they were acquired by TD Ameritrade a while ago, but the thinkorswim platform is still independent from the larger TD Ameritrade system.

[1] http://en.wikipedia.org/wiki/Options_strategies [2] www.thinkorswim.com

Theoretically. In practice you're going to get margin called and locked into a loss of approximately 100%.

If you didn't catch a short on it near $50, wait. The stock market bubble is going higher under Yellen's dove policy. The valuation crazy tech stocks like TWTR or LNKD will go that much higher accordingly. This market doesn't drop until the Fed stops or the market goes so high it is forced to crash (runs out of oxygen, everybody panics, mass selling ensues, down goes the latest bubble).

You can open an E*Trade account and then apply for whatever options level (1-3) you desire. You'll be asked questions about whether you understand the options market and assume the risks. There are then specific requirements for how much cash or marketable securities you need to have in account if you want to buy puts or sell calls.

There's a lot of paperwork and checks involved. No matter what route you go, it will take some time.

E*trade allows shorting stocks and writing covered puts at Level 2. The default (Level-1) allows only covered calls. They have an online application process. Usually chances are higher if you are trading over $100k.

There aren't any options yet, they'll probably start trading later next week. After that you can trade them through e*trade or whatever.

Use optionsxpress. Cheap, reliable, and they actually have online educational seminars that will help you understand the risks.

I was wondering this as well. Trading stocks always seem a little out of reach for some reason.

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