Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Posting-Version: version B 2.10 5/3/83; site umcp-cs.UUCP Path: utzoo!linus!philabs!seismo!rlgvax!cvl!umcp-cs!israel From: israel@umcp-cs.UUCP Newsgroups: net.movies Subject: Re: Trading Places Message-ID: <419@umcp-cs.UUCP> Date: Sat, 2-Jul-83 19:13:36 EDT Article-I.D.: umcp-cs.419 Posted: Sat Jul 2 19:13:36 1983 Date-Received: Sun, 3-Jul-83 16:47:02 EDT References: <114@cbscc.UUCP> Organization: Univ. of Maryland, Computer Science Dept. Lines: 31 What I believe happened (and I'm not an expert on the commodities market either) is that: First, Louis and Billy Ray waited for the price of frozen OJ stock to get up to $1.40 and then they sold. This is called selling short, which means that they were selling options that they didn't have yet. This is a binding transaction on them, which means that they have until the transaction is completed to actually acquire ownership of the necessary papers. Second, the announcement that the orange crop was going to be a full crop was released. This immediately lowers the worth of the frozen orange juice stock, which starts to plummet. When it got down to twenty-nine cents they bought up the necessary paper to cover their first transaction (which was what they had sold earlier in the first place). So what they effectively did was to buy thousands of shares at twenty nine cents apiece and sell those shares at one dollar and forty cents each. The order of the buying and selling doesn't matter. If the price had gone up, then they would have had to buy options at a higher price to cover what they had sold at a lower price, so they would have lost money. Are there any commodities experts out there who can confirm or deny this? -- ~~~ Bruce ...!seismo!umcp-cs!israel (Usenet) israel.umcp-cs@Udel-Relay (Arpanet)