Rather than buying it outright, you stock your brokerage account with enough cash to buy
the stock at your desired price.
Not exact matches
In addition, I would point out that equities are purchased and traded by private individuals, who inherently have time value of money and liquidity preferences that are also
priced into equities, given their specific limitations and characteristics (e.g., in the event of a
stock market crash, liquidity may disappear
at the exact moment it is most
desired, and therefore the risk of that lack of liquidity is
priced into the equity).
For example, in an ideal world, a
stock that earns E, pays a proportion d of that out in dividends, reinvests the rest to grow
at a perfectly constant rate g, and is expected to stay in business into the indefinite future, should have a P / E ratio of d / (k - g) where k is the
desired long term rate of return (say 0.10 or 10 %) that the
stock should be
priced to deliver.
Volatility is a commonly measured unit of risk in the financial world because a
stock's volatility dictates how often we will be able to sell
at the
prices we
desire.
Investors who have the
desire to and are able to find such
stocks (I'm not saying it's easy to do) and invest in them
at the right
price can outperform the market.
Therefore,
at $ 50 per share, the person shorting the
stock would agree to sell their share to someone, then wait for a specified period of time, hope that the
stock goes down, and then actually buy the
stock to sell once the
price hits the
desired low.
Selling into a bear market rally can help one raise the cash
desired to weather the series of tornadoes yet to come; it also gives one the confidence to increase
stock exposure
at more attractive
prices.
When the
stock price fluctuate significantly, the type of order you use is extremely important for getting the transaction executed
at the
desired price.
If you go with an excessive
stock allocation
at times of high
prices, you sustain intolerable losses and then suffer an emotional
desire to «recoup» the losses.