What happens if you have 100 shares of stock X at 10 dollars a share can you sell short 100 shares of stock x at 10 ?
I do it from time to time and at 1000 shares at a time. I do it with my NOK trades. If I'm with the trend and another day it starts to back up on me, Ill buy the other way to stop my loses. All it takes is one commission. When the reverse movement peters out, I dump the hedge trade and I have affectively increased my profit potential in the trending direction. And there is no gap loss from exiting and reentering trades in the opposite direction. It is a very affective strategy for swing traders. Daytraders and scalpers don't need it since they are out before the trend reverses.
Yes you could and it could serve as protection against loss if the stock goes down. You could set a stop loss at both the upside and down side so that if the stock goes down a stop at say $9 would sell the stock you already own, and you would buy the stock back at a lower price to make a profit on the falling stock. On the reverse you could set a stop to buy the stock to cover the short sale at $11 then appreciate the gains you make with the stock you already own. Does that make sense?
Of all the lame ideas I have seen here on ET - and believe me I have seen a lot - this is near the top of the list. If you're going to place a bet against yourself - and pay a commission and spread to do it - you really need your head examined. Because this is nothing more than a psychological game to prevent making a decision to either stay with the trade or get out.
Don't knock it till you try it. My trading account just goes higher and higher everytime I do it. And I will always do it when the movement calls for it. I shorted NOK way up in 15s and had to wait a month for the pathetic earnings that eventually cut it down. But in the mean time, that thing went up and down. I took the down, then hedged the up, over and over again. Finally it went down where it belonged and made more than twice what the strait drop would do. So there you go. Take it or leave it. If you know its heading somewhere, why get out? Just hedge the bad movements if you can afford to. RIMM is going up up up. And Im long. But the reversals are just way too quick and expensive for the strategy. So I buy extra daily lows and sell them daily tops, to add to my straight long trade. That way I dont miss the surprise breakouts that are happening. Earnings will be huge so that is my target a month from now. A lot of money to be made between now and then both on the strait long and the daily swings...
It's actually impossible to be both long and short at the same time. If your net position, across all accounts, is greater than 0 then you're long. If your net position, across all accounts, is less than 0 then you're short. Being long 100 shares in one account, and selling short 100 shares in a separate account is exactly the same as selling your original 100 shares and being flat. Being long 100 shares in one account and selling short 200 shares in a separate account, is exactly the same as reversing your original long position and being short 100 shares. Being long 200 shares in one account and selling short 100 shares in a separate account is exactly the same as selling 100 shares of your original 200 share position.
Yes, you can, in a retail trade its called 'short against the box'. Although OP's example many not seem to make sense at first glance. Margin transactions are Type 2, short against the box is a Type 6 transaction if memory serves me right. Back when all transactions involved physical certificates being exchanged, the long shares were placed into a 'box', to avoided selling your long shares on the opening short sale. Anyone who has been a registered representative with a broker/dealer understands why having this capability makes sense.
The people who bagged your suggestion have just proven how little they know about trading and intesting in general. Shorting Stock you own is quite common. Shorting an identical size parcel to the postition you own is referred to as going short against the box. It's quite common among more sophisticated investors. Sometimes, an investor will hold a long term position in a stock and if they sell they will be liable for capital gains tax on any profits. In some countries this is as high as 50% of profit. However, if the investor thinks the stock is overpriced, they lock in a guarenteed profit by taking an equal short postion. When the market returns to a more resonable price they cover the short and they still own the stock with a nice little earner on the side. The profit on the short is taxed at the company rate or personal tax rate which is less than the capital gains rate. So it really wasn't a stupid question. Runningbear