You lost $40/share. You might make it back. You might not. You might make even more. Are you aware of the Random Walk Hypothesis? It is flawed on a micro level, since there are occasional mispricings that you can get in on if you've got a good handle on the intrinsic value of the company (which is the point of value investing strategies). But overall, what it says is that regardless of what happened yesterday, you're equally likely to go up or down today, tomorrow, and every day after that. You lost 40%. You might lose another 40%. You might gain 67% back up to 100. Every day is a new day.
Your stock is worth $60. You can sell it for $60. If you tried to sell a futures contract one month from today, you would sell it for about $60. It could end up at $100 tomorrow. It could also end up at $20. All that is priced into the market. Think about it - if you knew you could sell the stock for $100 tomorrow, wouldn't you buy as much as possible? A few plays like that and you're a billionaire.
Correct. You don't actually lose any money until you sell it. Although, if a stock drops $40 in one day...things aren't looking good for a possible rebound.
Right; it is a "paper loss." It isn't a "realized loss" unless you sell the stock at a lower price than what you paid for it.
True, sort of, but theres no guarantee it will ever go back up.
Ok so im pretty sure I know the answer to this but I just wanna make sure. When you buy a stock at 100 dollars and the next day it drops to 60 dollars, you technically didn't lose any money until you sell it correct? because you can wait to see if the stock goes up right? everything else I know.
