Betting on shares falling... ??

monkey_writer

Hello, I remember reading recently that there is an investment scheme out there whereby you effectively bet on the price of shares falling. I think it works something like you buy the shares and rent them out while they fall then sell them when they go up again... I just saw this kind of scheme featured in the latest Bond film so I know I didn't imagine it.

Could anyone tell me what this type of scheme is called?

Also, does anyone know of a beginners list of all the different investment schemes (both legit and not so legit) with jargonless descriptions?

Thanks so much!

navig8r

One method is called spread betting whre you sell the shares you don't have in the hope of buying them when they have fallen to a lower price ..you pocket the difference I use Deal4free but there are others.

Dave

dukesy_2

There is another company who offer straight bets (NOT spread which is very risky !)

https://www.betonmarkets.com

You can also try it out for free (tis good fun that way!)

sambessey

Shorting you mean?

What you are doing is effectively loaning x amount of shares out at market value to someone with a promise to buy them back later at the market price at that time... Obviously you only make money if the price falls between the time you loan them out and the time you buy back.

DO NOT go into this unless you KNOW what you are doing!!!! (and to be honest it sounds like you don't).

Your losses are unlimited, as if the share price rockets you will get a margin call from your broker and have to pay the difference between the price you 'sold' at and the price of the shares now.

Imagine you 'sell' 5000 shares in say... Vodafone at 140p each, and the price rises to 160p, you would have to find £1,000 to cover the difference what you paid and what the shares are now worth... If Vodafone then surges to 200p, you will owe .6*5000 (£3000).

The losses could be even more extreme if you sell £1000 of shares in a company with a share price of 10p and it rises to 15p, that's £500 you need to find!

So be very careful

I beleive there are ways of doing it where you can limit your losses (a bit like a stoploss on a share purchase) but still it's a more dangerous game than simply buying shares.

cheerfulcat

monkey_writer wrote:

Hello, I remember reading recently that there is an investment scheme out there whereby you effectively bet on the price of shares falling. I think it works something like you buy the shares and rent them out while they fall then sell them when they go up again... I just saw this kind of scheme featured in the latest Bond film so I know I didn't imagine it.

Could anyone tell me what this type of scheme is called?

It's not a scheme as such, it's just a form of speculation, called shorting or short selling. You borrow the shares and sell them at today's price, hoping to buy them in the market more cheaply later and return them to the lender. Details here. Perfectly legal but considered by some to be rather unethical. It is also very risky, far riskier than " going long " i.e. buying the shares.

Also, does anyone know of a beginners list of all the different investment schemes (both legit and not so legit) with jargonless descriptions?

It's a language you will need to learn at some point so you might as well start now! But you can have a look at the Incademy free courses, which explain things fairly simply. And you might find Investopedia useful, as well.

HTH

Cheerfulcat