Short Selling Guide

Short selling stocks in Stonks-9800 is a little unintuitive and I've seen fellow community members mention this point a few times here and there so I wanted to make this guide to hopefully clear up the mechanic as it currently works in the 0.1 patch(es)

Mechanics

Short selling is the act of borrowing shares and selling it at current market price with the expectation that the stock price will drop in the future and you can buy back the borrowed shares at a lower price and make a profit in the difference between the two points.

With Update 0.2, stock shorting has been restricted to having a prerequisite of 9 financial success(?) before you get a notification allowing to you participate.

In Stonks-9800 there is a tab in the exchange menu for short selling.











For my examples, I will be using Ikuzu to demonstrate.

As can be seen in the screenshot above, we already have 50 shares in Ikuzu.

Moving onto the short selling screen, it looks very similar to the regular exchange, except instead of stocks/ownership% we have credit/owned shares.

Let's start by shorting 100 shares of Ikuzu:











We do this simply by pressing the + button and increment it to the amount we want, similar to the exchange you can also change the rate at which you increment by changing the x1-99 setting.

You can see at the bottom of the menu, it says we'll get ¥199,468.32 for this exchange (minus the trade percent). This will be immediately credited to your account upon pressing deal.

From now on I will be short 100 shares (denoted as credit 100 in the exchange menu) and every month I will be paying to borrow those shares (sorry if the numbers don't match, I reloaded the save because I forgot to grab this screenshot the first time)











To close out the shorted shares you can either use your pre-existing owned shares in the company or buy them at the current market price. To do this in-game, you just press the minus button and it'll use either of the 2 options I previously stated to close out your borrowed shares.

When using pre-existing shares to close out your shorts, the transaction at the bottom will note that ¥0 has been exchanged.











Meanwhile if you buy the shares outright, it will take that money from your current capital











The game will prioritize using pre-existing shares which can be annoying if you wanted to hold them or if the cost basis of the pre-existing shares would cause a loss.

This is why I tend to prefer shorting companies I have 0 shares in although you could buy the exact amount of shorted shares at current price on the exchange and then use those in the short selling menu to cover your borrowed shares, it's an extra hassle.

The total amount of shares you can short at a time is based both on your current capital (I don't know the exact % of your cash) and the amount of outstanding shares in the company (you can't short more shares than what would get you 100% ownership in the company).

Profiting Via Short Selling

So now that we have an understanding of how short-selling is implemented, how do we make money?

We take the mantra of "buy low, sell high" and flip the order of operations, in our case "sell high, buy low".

For example, in the stock list I see that Circle is worth ¥48,808 per share. Let's believe that the rng is good today and the stock price is gonna go down.

I'll short 100 shares and get ¥4,880,800 in cash. We'll earn money if we can buy back the 100 shares for <¥4,880,800 (say the price of circle drops to ¥20,000 per share, I only spend ¥2,000,000 to buy back 100 shares of Circle).

Conversely, we lose money if the price rises (if the price of Circle rises to ¥60,000 then I would have to pay ¥6,000,000 to buy back 100 shares and that costs more money than what I got selling the original 100 shares).

A key point to be aware of is that this is just the profit off the trade alone, to make sure you really are earning money you need to subtract the taxes, cost of borrowing money/shares, and any other expenses you make during the month (and future months if you hold longer than 1 month).

To better illustrate the point, I created a new save game and shorted the highest price stock at the beginning of the game and tracked the price across a couple months.

I put the numbers (roughly rounded up and down) into a table:

Stock Price (Est.)	Initial Credit	Buyback Price (all shares)	Difference after buyback	Taxes (Initial Credit)	Borrow Cost	Total Profit
$53,900.00	$3,596,100.00	$0.00	$3,596,100.00	$503,454.00	$0.00	$3,092,646.00
$56,250.00	$3,596,100.00	$3,712,500.00	-$116,400.00	$503,454.00	$0.00	-$619,854.00
$62,750.00	$3,596,100.00	$4,273,500.00	-$677,400.00	$503,454.00	$0.00	-$1,180,854.00
$62,750.00	$3,596,100.00	$4,273,500.00	-$677,400.00	$503,454.00	$42,818.00	-$1,223,672.00
$50,000.00	$3,596,100.00	$3,303,300.00	$292,800.00	$503,454.00	$42,818.00	-$253,472.00
$38,150.00	$3,596,100.00	$2,518,360.00	$1,077,740.00	$503,454.00	$42,818.00	$531,468.00
$38,150.00	$3,596,100.00	$2,518,360.00	$1,077,740.00	$503,454.00	$77,678.00	$496,608.00
$32,860.00	$3,596,100.00	$2,168,600.00	$1,427,500.00	$503,454.00	$77,678.00	$846,368.00
$32,860.00	$3,596,100.00	$2,168,600.00	$1,427,500.00	$503,454.00	$104,578.00	$819,468.00

Notes about the table (had dollar signs in the original formatting on my excel sheet, sorry for the inconsistency) -

-The taxes are only priced in once since you only get taxed on the initial trade where you sell the stocks for the first time (and any subsequent time you short more shares and get more credit).

-The cost of borrowing is a sum that gradually accumulates every month you wait (in my example I let the game run for 3 whole months).

-Forgot to make a column for monthly expenses, so add in an imaginary ~40k each month just to keep our money-drinking protagonist alive

As we can see, after selling ~67ish shares of this stock at ~54k each, even though the trade would be profitable selling at a share price of 50k ea the extra expenses and taxes would make the overall trade unprofitable. I would only profit when the share price dropped to ~38k and below (judging by the range, we'd probably be break-even or profitable at 45k and below).

If I had tried to buy-back the 67 shares when the stock price was 62k, I would of been heavily in debt on the trade.

A key mechanic to take note of, unlike many modern investment brokers in real life, when we short shares in Stonks-9800, the money earned from selling the borrowed shares is available to us immediately (instead of locked up by the brokerage until you buy back the owed shares).

This is bad tax-wise as paying 5% income tax on 3,600,000 (180,000) is much higher than paying 5% on a final gain of 500,000 (25,000).

However, what this allows us to do is use the money for other purposes such as paying expenses or making a different trade.

You can use the money to buy another stock, make a deal (when offered), or take up an innovation project. Or you can just sit and hold and control your risk/expenses while you wait for the stock price to drop into a profitable range.



I hope this guide helps people use short-selling in their strategy or just explore the mechanic in general.

As a bonus, a handy trick I like to do is to borrow the max amount of money from the bank loan, use that increase in capital to short more shares than I can with my current cash pool, and immediately pay back the bank loan on the same day to avoid any interest on the loan.

[TheJeffGuy]

Your strategy of using a loan to finance a larger short position is interesting, but aren't you just paying interest on your shorts now instead of on the bank loan?

[merchantninja]

In "short", short selling is the opposite strategy of regular trading. Normally, you buy low, sell high. Short selling you borrow high, return low. You get money from the initial borrow and hopefully return for less so you keep the bulk of what you borrowed.

[Airjelly]

They're not hearing you but I feel you brodie

[Yellowshoes]

Shorting literally doesn't work for me it is basically the same as buying, like when i short i have to pay instead of getting payed lol

[MF Kraven]

I literally make majority of my money by short selling because i'm so bad at choosing what company will be successful, so by preying on the downfall of Homda- you too can make billions!

[TheyCallMeNyquil]

@seekerfate thank you for testing this. If i had a way to input suggestions a trade p and l and individual charts for each company or at least sectors like energy etc. since there is no filter option and companies are always random the more in depth the creator gets with each company the more play time we will feel comfortable with.

[SeekerFate]

@TheyCallMeNyquil

I was curious so I did a quick experiment,

Started new save on normal difficulty setting (initial 750k, dipped to ~748k because expenses at game start),

Immediately shorted highest price stock (priced 39,189 ea) on the first day market was open after New Years
Earned 3,818,373.18 -> account value 4,509,32.57

Daily expenses set to 40/100 (default)

First month report (02/01):
Expenses - 438,567.61
Cost of Borrowing - 54,829.00
Taxes - 274,471.11
(add ~300k monthly expenses for 3 months spent waiting combined)

Waited around 3-4 months for the stock price to fall to 26,422 ea
I bought back my shares for 2,536,512.00

After next monthly report (1980/06/01) rolled over, I'm currently sitting at 1,101,269.19

No birthday money/random event money so that didn't contribute to my earnings


I do agree that the game could give us a trade log to assist players in figuring out profit/losses

[TheyCallMeNyquil]

But shorting actually works? I had a short sale i executed and i thought i was in massive profit however it cost me money. so question is how can this be patched to be more intuitive for the player. We really need a profit and loss colorization or something more pronounced. among other things.