2094: "Short Selling"

This forum is for the individual discussion thread that goes with each new comic.

Moderators: Moderators General, Prelates, Magistrates

User avatar
orthogon
Posts: 3078
Joined: Thu May 17, 2012 7:52 am UTC
Location: The Airy 1830 ellipsoid

Re: 2094: "Short Selling"

Postby orthogon » Wed Jan 09, 2019 5:26 pm UTC

aljohnso wrote:My favorite description of short selling is inverted Wimpy - "I will gladly pay you today for a hamburger on Thursday".

Huh? I thought I knew pretty much what short-selling was, but I'm having a lot of trouble understanding how this describes the same thing. It sounds more like a futures contract, but with the full price (of the hamburger) paid at the time of the contract (today) rather than at the delivery date (Thursday).
xtifr wrote:... and orthogon merely sounds undecided.

User avatar
Quizatzhaderac
Posts: 1798
Joined: Sun Oct 19, 2008 5:28 pm UTC
Location: Space Florida

Re: 2094: "Short Selling"

Postby Quizatzhaderac » Wed Jan 09, 2019 7:18 pm UTC

I'm not really sure what Aljohnso is getting at (may their favorite bad description), but his inverse Wimpy analogy is pretty terrible. You are definitely buying the hamburger today (and immediately selling it) and paying for it Thursday (at Thursday's price).

The inverse Wimpy would be a futures contract.

I'd say in general, explaining short selling by analogy is a lousy idea. It is a little complicated, but it's not so complicated (like the formalism of relativity) that you can despair explaining it in one conversation. Plus as something that the common person can actually do, it's worthwhile to have an accurate understanding of what's going on.
The thing about recursion problems is that they tend to contain other recursion problems.

User avatar
ucim
Posts: 6859
Joined: Fri Sep 28, 2012 3:23 pm UTC
Location: The One True Thread

Re: 2094: "Short Selling"

Postby ucim » Wed Jan 09, 2019 8:04 pm UTC

Quizatzhaderac wrote:but it's not so complicated (like the formalism of relativity) that you can despair explaining it in one conversation.
The key idea is that you are borrowing stock (and then selling that borrowed stock to somebody else). Once you get your head around the idea of borrowing stock (it's more like borrowing money than borrowing a car), the rest is easy.

Jose
Order of the Sillies, Honoris Causam - bestowed by charlie_grumbles on NP 859 * OTTscar winner: Wordsmith - bestowed by yappobiscuts and the OTT on NP 1832 * Ecclesiastical Calendar of the Order of the Holy Contradiction * Heartfelt thanks from addams and from me - you really made a difference.

User avatar
Archgeek
Posts: 264
Joined: Wed May 02, 2007 6:00 am UTC
Location: Central US
Contact:

Re: 2094: "Short Selling"

Postby Archgeek » Thu Jan 10, 2019 1:05 am UTC

orthogon wrote:
aljohnso wrote:My favorite description of short selling is inverted Wimpy - "I will gladly pay you today for a hamburger on Thursday".

Huh? I thought I knew pretty much what short-selling was, but I'm having a lot of trouble understanding how this describes the same thing. It sounds more like a futures contract, but with the full price (of the hamburger) paid at the time of the contract (today) rather than at the delivery date (Thursday).

Yeah, a burger-related short sell would be more like "Permit me to borrow a hamburger today, and I'll repay a hamburger Thursday with an extra pickle slice.", but Wimpy's immediately selling the burger on the street, and is counting on a sale Thursday to leave him with a net gain in his strange sandwich arbitrage scheme.
"That big tube down the side was officially called a "systems tunnel", which is aerospace contractor speak for "big tube down the side."

User avatar
Soupspoon
You have done something you shouldn't. Or are about to.
Posts: 4060
Joined: Thu Jan 28, 2016 7:00 pm UTC
Location: 53-1

Re: 2094: "Short Selling"

Postby Soupspoon » Thu Jan 10, 2019 9:25 am UTC

Archgeek wrote:strange sandwich arbitrage scheme.

That's going to be the name of my band's first album…


Return to “Individual XKCD Comic Threads”

Who is online

Users browsing this forum: rhomboidal and 42 guests