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Advanced Micro Devices, Inc. Message Board

  • bridyskim bridyskim May 10, 2013 3:06 PM Flag


    Hey guys. wondering if someone could tell me how it lowers the price when someone shorts a stock like amd? I live by Global Foundries and been reading about AMD and got 1300 shares.

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    • pessemist May 10, 2013 3:14 PM Flag

      When you sell shares 'SHORT' you are essentially selling someone shares. Sells lower a stock price just as BUYS raise a stock price. However, selling short means you don't have the actual shares to sell at the moment. At some point you need to 'cover' these shares and you do that by going into the market and buying the amount of shares you hold short. This closes out your trade.

      If you buy a stock your total possible loss is if the stock goes to $0 in a bankruptcy. So if you buy a $5 stock the most you could possibly lose is $5 per share. But if you sell a $5 share short you are hoping the stock goes DOWN in price so you can go in the market and buy the shares you need to cover with at less than $5 per share thereby pocketing the difference as your profit from the trade. The danger is that you have the potential for unlimited losses with a short sale. Let's say you sell a stock short for $5 and the next day the company announces they found a way to turn lead into gold real cheap. That stock you sold short for $5 could now open at $1000 a share and you still will be required to buy the share to cover @ $1,000 resulting in a $995 loss on the trade.

      When people refer to a short-sqeeze this is what they mean: AMD has gone up so far so fast that shorts want to cover before the stock goes even higher. They buy in the market at a panic and continue to drive the stock price up with all their buys to cover.

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