EDU Articles
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What is a short position in options trading?
Taking a short position is selling a security that you don’t own because you anticipate that its value is set to fall. In simple terms, an investor that takes a short position is betting against it.
“Shorting” is the opposite of being “long” in a security, where being “long” means to actually own it and to wait for it to appreciate. When you contact your broker or custodian to take a short position on a security, you essentially sell shares you don’t own, and then after a period, you have to return those shares to the custodian.
Your hope is that when that time comes, the security will be trading at a lower price, meaning you can use the proceeds of your short sale to repurchase the shares and then keep whatever is left over as profit. In a security that you short goes up in price, it means you have to come up with your own cash to repurchase the shares, which is called “covering the short.”
Short selling can be used for equities, all combinations of options, and so on. You can “cover” your short position by borrowing the security from your broker (e.g. on margin).
What are futures markets?
Futures markets are the formal exchanges on which futures contracts are bought and sold for financial products
What does delta mean?
Delta is a multiple which can quickly tell an options investor how much the price of their option will change per share in trading
What Happens When a Company Goes Bankrupt?
There is a hierarchy of which creditors and investors will be serviced first in the event that a company goes bankrupt
What is the Operating Cash Flow Ratio?
The Operating Cash Flow Ratio measures how many times a company can use cash flow from operations to cover debt expenses
What does it mean to Accept Risk?
To accept a risk is to bear the burden of loss or replacement if an eventuality occurs that causes an asset to lose value
Can I settle my debts for less than I owe?
It is possible to get a settlement arrangement that allows you to settle your debts for less than you owe
What is Return on Investment?
Return on Investment (ROI) is a ratio used to compare the net income of a project or investment to the amount invested
What is a Home Office Expense?
What is the Broadening Bottom (Bearish) Pattern?
The Broadening Bottom pattern forms when a stock price makes higher highs and lower lows following two widening trends
What is the Herrick Payoff Index in Trading
The Herrick Payoff Index is one of the only indicators to combine price, volume, and open interest data for analysis