Booyah Breakdown

Return to Article

Booyah Breakdown: Mad Mysteries

Tracy Byrnes

Oftentimes when Cramer says "Cuervo," he'll say "Make mine Cuervo," referring to the tequila, or some variation of that when approving of a stock. And yes, I've heard him use it as a verb, and while not sure, can only assume it has a similar meaning. "En fuego" is another Spanish Cramerism that comes up. When Cramer says something is "en fuego," he thinks it's on fire.

Now on the German front, Cramer will use "schnitzel" when he's referring to making a small buy or sell. So if he's buying a "schnitzel," he's doesn't want to buy too much. He'd rather wait until the stock price pulls back, a.k.a. falls, more.

If he's selling a "schnitzel," he's selling a little bit. For instance, during a lightning round a few months ago in reference to Hansen Natural (HANS Quote), he said, "there's gonna be too much profit-taking. I don't trust it here ... I want you to schnitzel out of it." So he wanted the caller to start selling small pieces of his holding.

Another time, a caller asked about Oneok (OKE Quote), and Cramer responded "there is no room in my portfolio for Oneok ... I think you just schnitzel your way out of it a share at a time." Again, he's saying to sell it a little at a time.

What is "long" and "short?" And when he says take money off the table, are you selling half or what you earned and leaving the initial investment. Do you sell the initial investment first? -- K. L.

Let's tackle the last part of your question first.

When Cramer, or I, or anyone else, says to "take money off the table," it simply means to sell some or all of your position. Cramer never wants you to be greedy, since "pigs get slaughtered."

That's because if you hold onto the stock too long in hopes that it will go higher, you'll often get burned. It'll tumble back down and your profits will vanish. So Cramer wants you to sell some or all of your position while you're still up so that you can cash in on at least some of your winnings.

How you sell that position is entirely up to you. If you're a "first-in/first-out" trader, you'd sell your initial investment first, then sell the next lot of purchased shares, and so on. Otherwise you can just pick which shares to sell. Just be sure to keep track for tax purposes.

Now, to be "long" a stock basically means you're just holding it in your portfolio. If you owned Microsoft (MSFT Quote), we could say you were "long Microsoft." You also believe the stock is going up, otherwise you probably wouldn't own it.

If you think the stock is going to take a dip and would like to try to profit from that fall, you could consider "shorting" it -- but remember, that's a risky strategy.

To sell a stock short, you must first borrow the shares of the stock you believe is going to tank from your broker.

So let's say you think Microsoft's Zune is going to bring the company crashing down. So you decide to short 1,000 shares of the company, currently trading at $29. You borrow the shares from your broker, sell them in the regular open market and now have $29,000 in your account.

As cool as that is, don't dismiss the fact that you now owe your broker 1,000 shares of Mister Softee.

Now let's presume the stock tanks, as you brilliantly predicted, and falls to $19. You decide that now is a great time to "cover your short position" -- that means you're going to pay back your broker. So you buy 1,000 shares for $19,000. You return the 1000 shares to your broker and keep the $10,000 difference ($29,000 less $19,000).

Yippee!

Ah, but here's the rub. What if the stock doesn't fall? What if the Zune actually takes off, and the stock jumps?

Well, then you're toast.

Let's say the stock jumps to $37. Now you'll have to spend $37,000 to get your broker's shares back. That means an additional $8,000 must come out of your own pocket to cover your short position.

So while there is money to be made shorting stocks, it's a gamble.

What is happening when Jim says there is a short squeeze? -- T.W.

Cramer is basically talking about supply and demand. When a squeeze occurs, there's a really big demand for a stock and not enough shares to go around. So the price of the stock gets pushed up.

That's actually what happened to TMX Elmo.

The new Tickle Me Elmo Extreme (which laughs hysterically, drops to the floor and convulses) was launched in September by Fisher-Price, a division of Mattel (MAT Quote), for $39.99.

Well, no surprise, it has become the hottest toy this holiday season and you can't find one in a toy store anywhere. So there has been a "squeeze" on TMX Elmo and it's now selling on eBay(EBAY Quote) for $150.

But back in stockland, this so-called squeeze gets worse when an investor has shorted that stock. Remember, the shorts (that's insider language for the people who short stocks) are making a bet the stock price will fall, as we discussed in the question above.

If something starts to push the price up, they'll panic and rush into the market to buy the shares back so they can repay their brokers and cut their losses. This panic buying actually drives the stock price even higher. And that forces more shorts to cover their positions, and so on.

And there you have it -- a "short squeeze."