Selling Stock Short: It's a Gamble -Smart versus Dumb Money

when you sell my stock short
i get paid in full plus commissions

now, had the stock risen
i would have made more profit
but, that's okay because in your wisdom
you did me a favor
by selling that lousy stock short
because the SOB was going down anyway
and i got my money and made a profit

i did this because you requested me to do it
with the intention of buying it back later
after the stock went down
as you predicted it would
-you saved my ass!
i got my money
before it was too late to sell
good thing!

what's even better
is that you have promised to buy it back
at a later date when the price goes down
and then return it to me
so i once had an overpriced stock
now it's gone
and it comes back to me later
with even greater value (p/e)
plus
you will purchase it at that time
and put it back into my account
like a little gift
whe-hell, let's see how much money i have made
i made a profit selling the stock initially
because the stock was going up when you asked me to sell it
i got full price for my shares
and now two months later
you are going to buy these very same shares
much cheaper you hope
and return them to me
sounds like a great deal
actually i feel a little guilty
to be making all this money off of you
so tell you what i can do for you
for saving my ass on that miserable stock
i will pay you the difference between what you paid for it
and what it was initially sold for
why should i make all that money
because i now have the same number of shares
that you bought for me
albeit, much cheaper
poised and ready to increase and make me a juicy profit
according to your wisdom


so, let's recap
somebody else buys my stock
i make my money
you promise to buy it back for me later when it goes down
and return it to me
and i'll pay you the difference
i mean
i would have lost that money
had i sold it myself later
had i waited to sell
but now i got my money
and i got all those shares back
because of you

sounds like a plan

but if the stock should happen to go up
after i sell it initially
i am up the creek
because i might have sold it for a higher price
and made a greater profit
you made me sell my stock
now i make you buy it back
same number of shares
at that high price
and deliver them to me as promised
sure, i got my money when the stock was first sold
and now when you buy it back for me again
i get high priced shares back again
all of them!
on you
you covered me ... us
love ya!
i really make a killing off of you
and never have to return a penny to you
although i should
i feel terrible about this
i just doubled my money
plus!
after all
business is business
sucker

it's a gamble
and as they say
the house always wins
in the end