Thinking about shorting?

Question

I'm getting greedy... The market is moribund and it's taking longer and longer for stocks to make that short term rebound. I'm thinking about shorting... Someone convince why I shouldn't.

Answer 1

By shorting a stock, your upside potential is the proceeds you receive.  The downside is you owing your broker (infinite) if the stock price rises.

Answer 2

Short covering rallies can be swift and large.

If you get over leveraged, you could get a margin call and be wiped out.

Better know what you are doing FIRST.

Answer 3

Remember, shorting a stock is extremely risky because the upside of a stock is unlimited.  You would need a margin account to short a stock since it is unknown whether all your cash in the account could cover losses in the event the stock goes up too much.

If you want to bet on a stock going down (bearish), a safer way is to consider buying put options where your downside risk is limited to the amount you pay for the option premium (plus commission of course).  

Here's a link to read about options trading and strategies in general.

Answer 4

You're taking to the wrong guy.  I've made a bunch shorting.  My two favorites that I closed out this month are below.  

It is a great mystery why people ignore the short side of the market, especially that the government has eliminated the pesky uptick rule.

Answer 5

Billionaire hedge fund manager George Soros said he has lost more money shorting stocks than he has made.  Shorting is a tough game.

There have been stocks that have been going up in this lousy market...JRCC, WLT, ANR, FDG, SQM, to name a few.

Scott Cole

www.kungfutrader.com

www.theultimatestocktradingsystem.com

Answer 6

I think it may be a bit late, especially in financials which are heavily beaten up. You can always try to short, but do it with a small part of your portfolio (10-20%) and do it for a quick profit. Realize that ANY good news will cause major spikes in the markets as people rush to cover their shorts.