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Car Stock Exchange CSX - The "Short" transaction explained
37 messages, Last post on Jun 09, 2008 at 8:11 AM
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Shorting In the CSX game, the “short” transaction is difficult to understand at first, so we’d like to provide everyone some help. Let’s say I decide to short a stock. I see a vehicle stock at $85 a share and think the CSX players have it overvalued. I go to the vehicle’s stock page (i.e., BMW M3 stock page: http://csx.edmunds.com/Main.php?do=individual_stock&stock=M3). I scroll down the page to the “Trade” button and click on it. On the Trade page I see the stock is now at $83.75, so I really want to complete my short transaction right away (it's moving down as I navigate!). I choose “short” and specify 1,000 shares. I click “submit trade” and then confirm the trade to make it go through the system. However, now I notice that my short values the stock at $82.20 a share. The stock continues to move down based on my trade and the trades-in-progress of other users. That’s why you might see a change in price at this point. To see the effect of this short, go to your Portfolio page. Look for two details there to help explain what just occurred and where you stand: 1. Look under “My Stocks,” where you will see a list of your current holdings. You should see the short there. Price column – the current price of the stock Shares – in parentheses for shorts (as opposed to buys) Value – this is NOT the value at which you shorted the stock. Instead, it is the current value of your short position – based on activity that has happened since you processed your short transaction. You will be up or down since you confirmed your trade Net Gain/Loss – how much you’ve made or lost so far on this transaction based on the most up-to-date price of the vehicle stock 2. Look under “Transactions” on this same Portfolio page (this is what confuses some players) You will see the short transaction listed there, but you will see different data. Here’s what it means: Price – this is not the same as the price you shorted the stock at. This price is the inverse of that price and it represents the minimum cost of the transaction. Why is there a cost? Let’s look at the next column to help explain why. Total – this is the maximum amount you could lose should the stock suddenly take off and leave you in a tough position. In other words, we want to protect players from chaotic market trends, where stocks go up and down in sudden and even irrational bursts. Even if the stock goes up by 2000%, you won’t lose 2000%. You will lose a limited amount – the amount you see in the “Total" column. The Transactions record simply shows you the maximum amount you could lose on the short. It's a short model with limits set in to keep the market a little more stable and to protect players. |
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Just wanted to let everyone know that I'll continue to post on this subject. Thanks, Mike CSX Game Supervisor
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Replying to: mikedrud (Feb 29, 2008 3:05 pm) So, if you shorted a stock at $75, then in your Transactions List, you will see the "price" listed at $25 for that transaction. Simply subtract 25 from 100 to get the price at which you shorted the stock in question. That formula should help players until we augment the messaging on the game pages and in the FAQs to help make Shorting a little more intuitive. I hope this helps. Good Luck! Mike CSX Game Supervisor |
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So what if a stock is $50.00. I want to short it, so I subtract $50 from $100? That gives me $50.00. That doesn't make any sense. Am I confused?
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Replying to: jcardani (Mar 02, 2008 7:21 pm) If a stock is at $50 when you short, it costs you $50 per share (same as if you buy). However, if that stock ends up to be at $30 then you made a profit of $20 per share. |
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Replying to: jcardani (Mar 02, 2008 7:21 pm) Essentially, you don't have $50 but a position in that stock. There is a cost to that transaction, just as there is if you bought the stock. The cost is the maximum you would have to pay if the stock skyrocketed and your short position became dangerous. Here's another way to think of it: You short a stock. In the "Transaction" list is says it carried a cost of $25,000 at $50/share. This means you shorted 500 shares. Let's say the stock goes down to $25/share. You "buy" that stock at $25/share or thereabouts. The "buy" here is to shorting what selling is to buying. It's the way of closing out your position. In this case, you make $25/share beyond the $25,000 it cost you to short the stock. It's a complicated idea, to be sure. I hope this clarifies it a bit. Thanks, Mike CSX Game Supervisor |
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Replying to: jcardani (Mar 02, 2008 7:21 pm) |
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I guess I should clarify my question. I am trying to figure out how the system calculates the value of the stock when you trade "short". If I am understanding correctly, a 75.00 stock will have a "short" value of 25.00 (100-75). I guess my understanding in the real world is that when you trade options, you can select what price you want to buy the stock at. In this game there is no ability to select or determine your own price. It automatically calculates a price for you to buy at. So, from other posts, I was understanding that the software calculates the short price by the invese of the stock value. No? |
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I still don't understand "Shorting".
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Replying to: go4gr8 (Mar 03, 2008 9:30 am) To simplify.... all you really need to know is: Short when the stock price is high and then buy to cover when the stock price drops low.
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Car Stock Exchange CSX - The "Short" transaction explained
