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clickety_clack | on: SpaceX bond worth 10% less than issue price – heading for junk bond status
The market “settling on a price” includes the actions of short sellers.
inigyou | parent
Do I need to be able to short bananas for the market to settle on the price of a banana?
notahacker | root | parent
If you're confident the price of bananas will fall tomorrow you absolutely can sign a contract to deliver bananas next week at the current price and then buy them when the price drops...
wredcoll | root | parent
Yes, you can but does that ability benefit the population/nation/market as a whole?
clickety_clack | root | parent | next
Yes, because the guy buying your bananas is able to make banana-buying decisions for next week based on the price you give him.

You’re not going to make up a silly low number because you actually have to buy the bananas yourself at some point, and you help price discovery because now that guy isn’t buying bananas at a higher price than someone is willing to sell them for.

wredcoll | root | parent
Just as a thought experiment, would you say there are any (societal) negatives to the possibility of thr price of bananas (or the share price of spacex) being able to fluctuate wildly based on semi-abstract economic manipulations, like shorts and futures and such.

What I'm getting at is when does it go from investing, "I think this entity is going to take my money and use it to build a profitable factory that will then return to me a share of the profits", to just gambling "I think this stock price will change by the end of the day and I'm going to bet on it", and what are the positives and negatives of that?

notahacker | root | parent | next
The price of bananas is generally likely to fluctuate less as a result of shorts, futures etc.

The distinction between investing vs gambling and positives and negatives sounds like more the subject of a PhD thesis than an HN comment! At some point the marginal benefit of smaller price spreads from very short term trade to actually allocating physical capital and labour to producing more valuable stuff might actually be lower than the amount it simply inflates asset prices, but that is much closer to microseconds than "you're not allowed to bet against this IPO, the insiders artificially pumping its value need to be able to cash out first"...

clickety_clack | root | parent | next
Well if the company is good, you can lose a lot of money taking short positions as a gamble.
quickthrowman | root | parent
Volatility should be lower with more market participants. More participants means that more information can theoretically be priced in.

Producers that use commodity futures to lock in a sale price need a buyer or speculator to take the other side of the transaction.

notahacker | root | parent | next
Well yes, to the extent the possibility to do that helps stop silly price spikes from a very short term shortage of bananas.
8note | root | parent
yes because shorts can also be wrong, and the buyer knows they have a stable price