Skip to main content
Business LibreTexts

Chapter 14: Buying on Margin and Selling Short

  • Page ID
  • \( \newcommand{\vecs}[1]{\overset { \scriptstyle \rightharpoonup} {\mathbf{#1}} } \) \( \newcommand{\vecd}[1]{\overset{-\!-\!\rightharpoonup}{\vphantom{a}\smash {#1}}} \)\(\newcommand{\id}{\mathrm{id}}\) \( \newcommand{\Span}{\mathrm{span}}\) \( \newcommand{\kernel}{\mathrm{null}\,}\) \( \newcommand{\range}{\mathrm{range}\,}\) \( \newcommand{\RealPart}{\mathrm{Re}}\) \( \newcommand{\ImaginaryPart}{\mathrm{Im}}\) \( \newcommand{\Argument}{\mathrm{Arg}}\) \( \newcommand{\norm}[1]{\| #1 \|}\) \( \newcommand{\inner}[2]{\langle #1, #2 \rangle}\) \( \newcommand{\Span}{\mathrm{span}}\) \(\newcommand{\id}{\mathrm{id}}\) \( \newcommand{\Span}{\mathrm{span}}\) \( \newcommand{\kernel}{\mathrm{null}\,}\) \( \newcommand{\range}{\mathrm{range}\,}\) \( \newcommand{\RealPart}{\mathrm{Re}}\) \( \newcommand{\ImaginaryPart}{\mathrm{Im}}\) \( \newcommand{\Argument}{\mathrm{Arg}}\) \( \newcommand{\norm}[1]{\| #1 \|}\) \( \newcommand{\inner}[2]{\langle #1, #2 \rangle}\) \( \newcommand{\Span}{\mathrm{span}}\)\(\newcommand{\AA}{\unicode[.8,0]{x212B}}\)

    “October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

    Learning Objectives

    In this chapter, you will

    By the end of this chapter, you should be able to

    As if options contracts and future options were not bad enough, the investment world has two more strategies to help separate you from your money, aye!, I mean increase your wealth through speculative transactions. (Have I ever mentioned that I am not very popular with many brokers?) In this chapter, we discuss buying on margin and selling short. Both involve borrowing from your broker. Both have significant risks. And as we have said in the past, instruction about syphilis is not an instruction to get syphilis. Okay, okay, maybe someday down the line, you may find a suitable situation for buying on margin. But selling short is downright dangerous. It’s right up there with futures contracts. Let’s see if we can scare you away from selling short for good!

    Presentation file - Study guide

    • 14.1: Buying on Margin
      Let's see how we can magnify our gains -- and magnify our losses! -- with the technique known as buying on margin. Yet another way to separate you from your hard-earned money.
    • 14.2: Selling Short
      Okay, Fun Seekers! Just wait until you learn how to lose theoretically unlimited amounts of money by selling short!
    • 14.S: Summary
      Congratulations ‒ You Have Finished Chapter 14 ‒ Buying on Margin and Selling Short

    "Horse Racing Betting Slip" by ATTRIBUTION: is licensed under CC BY 2.0

    This page titled Chapter 14: Buying on Margin and Selling Short is shared under a CC BY-NC-SA 4.0 license and was authored, remixed, and/or curated by Frank Paiano.

    • Was this article helpful?