Originally Posted by orhnsnmz
I think even the €78k were misreported/miscalculated and the actual money he invested were exactly €5.000, which would have made him nothing even if the shares would've tanked.
So this is a totally stupid act altogether.
But can someone explain to me how this actually works?
I go to a broker with 100k and say that the shares of this particular company will tank in the next few months and then what?
It's a bit like Trading Places.
Let's say I decide my Dortmund shares, worth £10 today, are going to tank a month from now. I find someone who wants to buy Dortmund shares at £10 each and agree to sell at that price one month from now if the price drops below a certain threshold, let's say £8.
In exchange I pay £1 which is non-refundable, kinda like an insurance premium.
So one month from now, when Dortmund shares have tanked to £8 I sell them for £10 which is the price I agreed to a month ago. £10 selling price - (£8 value + £1 premium) = £1 profit per share.
Because it's an option, if the price doesn't drop then I don't have to sell my shares and eat the £1 premium.
That's the gist of it anyway.