$AMC Entertainment (AMC.US)$ can i know what are the risks o...
$AMC Entertainment (AMC.US)$ can i know what are the risks of using margin to buy?
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sky2210 : Higher interest %
sky2210 : And high risk investment it’s better not to
iCornan : Example you are now in an apple store . 1 apple cost 1 dollar .
(BUY)
You buy 1 apple at 1 dollar . Few days later when you see the price has been raise up to 1.1 dollar per apple . You sell out . You get back your own 1 dollar + 0.1 cents of profit. This is BUY .
(SELL)
You wanted to buy 1 apple . But you have 0 dollar in your pocket . Seller then says he can borrow you for 1 apple BUT for an interest of 0.1 per day . So 1 day is over and you see the price has been raise up to 1.3 dollar per apple. You quickly sell back the apple (which cost 1 dollar initially) back to the seller with interest 0.1 (1 day borrowing) .
So when selling 1 apple = 1.3 . You pay back 1 dollar + 0.1 interest . You earned a total of 0.2 cents from differentiation .
You got it ?
sky2210 iCornan : You need to explain what if the price drop too
iCornan : To buy without margin will only lose at the max of your own investing money . You invest 10 dollar at most you lose 10 dollars
To sell with borrowing loans you need to pay interest . There are no limit of losing when the price go up and up . You will bleed even more before you even start realising . The best to do a lot of Due diligence before you starts shorting . If you’re planning for long term investing I suggest you look out for ETF like SPY or VOO . Or REITs (real estate) those are long term for earning . Tech company like apple is good as well . Normally to short (margin) on volatile stocks which is very risky but comes with high yield rewards.
102314401 OP : oh no. i think i bought a few of these stocks with margin. so is my best option to sell asap? then buy again?
小买怡情 大买养家庭 iCornan : Thanks for explanation, this help us to understand more. Thank you!
iCornan 102314401 OP : As long as price are going down , you’re earning . I can’t advise on your situation if you’re able to hold abit longer until price decreasing = your profiting then you buy back the shares that you short .