Skip to content
New issue

Have a question about this project? Sign up for a free GitHub account to open an issue and contact its maintainers and the community.

Sign up for GitHub

By clicking “Sign up for GitHub”, you agree to our terms of service and privacy statement. We’ll occasionally send you account related emails.

Already on GitHub? Sign in to your account

DOCS: Document shorts in terms of actual finance terms #1908

Open
wants to merge 1 commit into
base: dev
Choose a base branch
from
Open

DOCS: Document shorts in terms of actual finance terms #1908

Changes from all commits
Commits
Show all changes
1 commit
Select commit
File filter

Filter by extension

Filter by extension
Conversations
Failed to load comments.
Loading
Jump to
Jump to file
Failed to load files.
Loading
Diff view
Diff view
17 changes: 15 additions & 2 deletions src/Documentation/doc/basic/stockmarket.md
View file
Open in desktop
Original file line number Diff line number Diff line change
Expand Up @@ -14,11 +14,24 @@ So these concepts below should seem similar, but won't be exactly the same.

## Positions: Long vs Short

First off, note that _all_ transactions have a flat commission fee, so
high-frequency trading is not a good strategy.

When making a transaction on the stock market, there are two types of positions: Long and Short.
A Long position is the typical scenario where you buy a stock and earn a profit if the price of that stock increases.
Meanwhile, a Short position is the exact opposite.
In a Short position, you purchase shares of a stock and earn a profit if the price of that stock decreases.
This is also called 'shorting' a stock.

In a Short position, you borrow shares of a stock to sell and earn a profit if the price of that stock decreases.
This is also called 'shorting' a stock. The proceeds from the sale are held as
collateral, called 'margin'. You also have to add additional margin equal to
the current value of the stock - this is the cost to 'purchase' the short.

When you close a short position, you buy back the shares to pay back the securities loan.
You then get the margin back, minus whatever was used to repurchase the shares.
So, your profit is still the change in price times the number of shares.
Beware that, unlike Long positions which have unlimited upside and limited
downside, shorts have limited upside and unlimited downside, and selling a
sufficiently underwater short can cause your money to go negative.

Shorting stocks is not available immediately, and must be unlocked later in the game.

Expand Down
Loading