StockFetcher Forums · General Discussion · Shorting Question<< 1 2 >>Post Follow-up
shillllihs
5,963 posts
msg #152286
Ignore shillllihs
5/22/2020 8:10:31 PM

We’ve discussed the potential rewards of shorting but let’s discuss the potential risks.
Who has experience with a short that has exceeded someone’s potential to pay it back or knows someone.
Or maybe knows what would happen if this happened. What will they do? Will they take your home, garnish your wages etc. So in a hypothetical, my son turns 18 in 2 years, he shorts stocks and it implodes and he owes 100k but he owns no collateral. Will they garnish future wages or let him off the hook.

shillllihs
5,963 posts
msg #152291
Ignore shillllihs
modified
5/23/2020 3:01:22 PM

I only ask this because I was just playing around with shorting volatility and on paper in 2 years, I would have turned 100k into 950k shorting. But the thing is I’m worth way too much to risk a collapse. I want to teach my kid how to do this since he would have nothing to lose. After 10 years I can see this worth 200 million

svtsnakebitn
150 posts
msg #152296
Ignore svtsnakebitn
5/23/2020 7:07:31 PM

The brokerage will pursue any same avenues as a debt collection agency - possibly only bankruptcy will absolve your debt.

shillllihs
5,963 posts
msg #152298
Ignore shillllihs
5/23/2020 8:20:09 PM

Interesting.
I was actually wrong, 100k would have made 2,7000,000 in 2 years.


gmetzl
4 posts
msg #152302
Ignore gmetzl
5/24/2020 12:11:31 AM

Does the 100k to 2.7M in 2 years consider any limitations involved with shorting, such as stocks that may be hard to borrow?

shillllihs
5,963 posts
msg #152308
Ignore shillllihs
modified
5/24/2020 1:15:39 PM

Before all fees.

xarlor
561 posts
msg #152313
Ignore xarlor
5/25/2020 12:14:19 PM

While I am no lawyer or financial advisor, I know that unsecured loans of any type (shorting would be a form of an unsecured loan) allows the lender/debt collector to take you to court. There they would seek repayment through liens or seizure of assets and/or wage garnishments (up to 25%) until the debt is repaid.

You could file for bankruptcy. That removes the debt and wage garnishments, but not any liens on property.

To your question, what if you have no money, no assets, no property? My opinion, again I am no expert in these matters, seems to me bankruptcy would be the only answer. Goes on your credit report for 7 years. In public record for 10 years. After that, you would still be hard pressed to get any type of loan without a co-signer. Also, any insurance rates (car, house, life, etc) will be significantly higher going forward.

TL;DR - Shorting is an unsecured loan. All laws for unsecured loans apply in this case including liens, seizure of assets, and wage garnishments.

Disclaimer: I am not a certified financial planner/advisor, nor a certified financial analyst, nor an economist, nor a CPA, nor an accountant, nor a lawyer. I’m not a finance professional through formal education. The contents of my posts on this or any other site are for informational and entertainment purposes only and do not constitute financial, accounting, or legal advice. I can’t promise that the information shared on my posts here or any other site are appropriate for you or anyone else. By using any information I post, you agree to hold me harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information found here or on any other site.

shillllihs
5,963 posts
msg #152319
Ignore shillllihs
modified
5/25/2020 1:01:02 PM

Good to know.

xarlor
561 posts
msg #152320
Ignore xarlor
5/25/2020 1:14:27 PM

Getting into opinion here, without any facts to back it up.

If your kid is living in your house and his name does not appear on any legal documents pertaining to ownership of the property, I opine that the most they can go after are his financial accounts; brokerage, checking, savings, etc. This is assuming those accounts are under his name only with no co-signers or joint status.

One thing to keep in mind, posts like these are admissible in any court (and browser search history). A good lawyer could make a case that you are at fault as well since this was your plan and not his. Who knows whether it would fly or not, but I wouldn't want that nagging on me.

We are all being watched. Always.

shillllihs
5,963 posts
msg #152321
Ignore shillllihs
modified
5/25/2020 1:20:49 PM

My son wants to take business and finance and is asking questions about trading. I told him I’m not the best trader so I have to learn from others. All I know is it’s legal to trade and short at 18, might be at any age idk. I also told him shorting might be risky but I didn’t know how risky, I’m just going on hearsay.
He’s going to make his own way

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