Free The Day Trader by Stephen Frey Page A

want that company’s stock price to go down, right?” I observe tentatively, trying to learn whenever I can.
    To really grasp the equity markets, it’s important to understand that not everyone out there wants to see a stock’s price go up. Not everyone is a bull. It may seem strange, but some investors—those who believe the outlook for a company is poor—expect to see the price go down, and so they invest that way.
    To execute this bearish strategy, shorts borrow a block of shares from a market maker—usually an investment bank—then sell the borrowed shares to someone like you or me through a broker, get the proceeds from the sale, and invest that cash in other opportunities. At some point in the near future they’ll have to get the shares back to the market maker to satisfy the loan so, in essence, while they’re borrowers, they are “short” the shares. The shorts are hoping that the price of the borrowed shares will drop quickly so they can purchase other shares more cheaply in the open market and deliver those newly purchased shares back to the market maker to satisfy the original loan. When the loan is satisfied, the shorts’ profit is measured by the amount the price dropped while they were borrowing the shares.
    “Isn’t that what you mean, Slammer?” I ask again when he doesn’t respond.
    Of course, if the shorts are wrong and the price rises after they’ve borrowed the shares, they’re screwed because ultimately they’ll have to buy a new block of shares at a higher price, losing the difference between that price and the price where they originally sold the borrowed shares. Plus they’ll have to pay interest.
    Selling short is a risky strategy because there’s no limit to an investor’s risk. The price of the borrowed shares could go way up while they’re short. But the rewards can be substantial too. The neat thing is that, as a day trader, you can be active whether the market is going up or down, or the price of a particular stock is going up or down. So you can make money no matter what the economy is doing, or what a particular stock is doing.
    “Slammer?”
    Max’s frantically moving hands finally pause for a moment over his keyboard, his fingertips trembling slightly. He looks up at me, teeth clenched. “Of course that’s what I mean, you idiot. And don’t call me Slammer again. I hate that name. You hear me, Gus ?”
    From where I’m standing I have a clear view over the chest-high walls of everyone in our five-cubicle group, and I see Mary glance up from her computer screen and roll her eyes.
    “Be nice, Slammer,” she chides delicately. “Let’s all just try to get along. There’s enough stress in here as it is without us being mean to each other.”
    “Shut up, Sassy,” Max snarls, pounding on his keyboard again. “I’m gonna double down,” he says loudly. “I’ll teach the shorts not to screw with me. And if they keep doing this, I’ll find out where the fuckers live, and then they’ll be sorry.”
    “Keep it down, Slammer,” Daniel warns, staring at his screen. Daniel is the most intense trader in our group—what they call a “banger”—executing a new transaction every few minutes. He rarely leaves his desk all day, methodically buying and selling from the opening bell to the close. “I’m trying to concentrate.”
    Slammer jumps out of his seat and points angrily past Mary at the younger man. “You say one more thing like that to me, Freak Show, and I’ll come over there and teach you a lesson. I’ll dye that purple hair of yours bloodred, and I’ll yank that damn piece of jewelry out of your eyebrow. Then we’ll see how big and bad you are.”
    Daniel mutters something I can’t hear and continues to trade.
    “What did you say, you little coward?” Slammer demands. “Hey, maybe I ought to show you what we did to people like you down in Nicaragua.” Slammer glances at me. “What the hell are you staring at, asshole?”
    My temper flares