[ga] Re: WLS and bares

[JessWest@aol.com]

In a message dated 1/11/2002 10:31:05 AM Central Standard Time, patrick@quad.net.au writes:


> Bear Trading.  Normally people think in terms of buying stocks (aka shares) on
> the stock exchange.  The person who is selling is expected to have them to
> sell.  However, it is perfectly possible for a person to sell shares that they
> do not own.  Of course, they must deliver shares on the due date (often a few
> days into the future) and they will have to buy them in the market on or
> before the delivery date.  Naturally the seller hopes the price will go DOWN
> before they are required to buy them.   That's sometimes known as "going
> bear".

Not exactly true Patrick, but close.  In order for a person to sell shares they do not own, they must borrow  stock from someone or the brokerage firm ... which is a "short sale".   If they own the stock, then they can "sell against the box".  

In the options markets you can either buy or sell a put or buy or  sell a call (or spreads and straddles).  If you sell a put,   it is called a "naked" and can be quite dangerous and most firms will require the full cash price of the stock to be in your account.  The  person selling is referred to as a "bear", but the actual term is "trading bare"., ie bare of stocks or naked.  

If you sell a call and you own the underlying stock, then it is called "writing".  Any option can be exercised at the holder's discretion. 

jess