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| Shorting |
| What is Shorting? |
Shorting is equal to selling predictions; only difference is that you didn't own the predictions at the time of selling it. So you kind of borrowed it from LordsOfOdds and sold it under the assumption that you will buy it back and return it later.
Shorting is a way of playing, that lets you profit when a prediction price goes "down". Normally, when you buy a stock, you make money if the price goes up (you know the adage, "buy low, sell high"). It's just the opposite when you short a stock: you make money if the price drops; if the price rises you "lose" money.
Here's an example:
Say you short (i.e. sell) 100 units of the prediction "India will win more than 3 Gold Medals at Olympics 2008" at a price of  50 each. Now you need to buy back these 100 units since you didn't own them at the time of selling it. One week later the price of the prediction falls to 20. You buy back these 100 units from the market making a profit of 30 per unit (i.e. net profit of 3000) and do a victory dance! |
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| Why do you have Shorting? |
Shorting allows players to voice their opinion when they don't believe in a prediction or feel it is priced too high. It lets players put downward pressure on the prediction price. Without shorting, the non-believers (in the prediction) won't have a voice in the game.....other than writing grumbling posts about how certain predictions won't come true or are overpriced. |
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| How do I Short? |
You don't need to do anything different. Just sell the predictions that you don't believe in or feel are overpriced. Then when the price falls you could either buy it back or if you are sure that the prediction won't come true, just wait for the event to happen.
Once the event takes place and as you expected, the prediction wasn't correct, it's value will become 0, we'll automatically adjust your account assuming you bought it back at 0.
On the other hand, if you were wrong and prediction does come true, we'll automatically adjust your account for a buy back price of 100. So you better keep an eye on your predictions! |
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| How much can I short? |
How much you can short is limited by the value of your Total Riches (i.e. sum of your Loot Balance & Current Predictions value). |
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| How much can I lose? |
In the worst case, the prediction that you shorted comes true. For example, you shorted 100 units of a prediction at a price of 30 each. If the prediction comes true, then you will have to buy it back at 100 each, making a loss of 70 on each prediction. Hence, your net loss will be 7000. |
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| How can I keep track of shorted stocks in my portfolios? |
| Shorted predictions will show with a negative volume. |
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| Now I'm curious. Where can I learn more about how shorting works outside LordsOfOdds? |
To read more about shorting:
- http://en.wikipedia.org/wiki/Short_selling
- http://beginnersinvest.about.com/cs/newinvestors/a/022703a.htm
- http://www.fool.com/FoolFAQ/FoolFAQ0033.htm
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