Stock Short Selling Anyone?

[MoneyTips4U]

Hey everyone!

So I am kinda new to the stock investing deal. Does anyone know much about short selling stocks. And if so, do you have any insights into this method of investing?

Any comments or advice is appreciated.

thanks!

[altcur]

I guess the first question would be, why would you want to get into short selling as opposed to regular investing? My opinion is that you shouldn't move into a specialty of stock trading until you have mastered the basics first.

[Tabs]

If I remember correctly (and I may not), you have to have a margin account with your brokerage, where they may also require a cash buffer from you, and they may call (sell) your stocks anytime they want, especially if you're too far deep in the hole.

I've never done it that way myself. Just seems too much of an iffy proposition just to take a short position, especially after all the horror stories I've read on the internet (but it is the internet).

Instead, I used covered calls myself. That is, I would buy stocks that I was long term bullish, but was short-term bearish. Best case, I was right, and I make money. Worst case, I was wrong, and I can keep hanging on to my stock.

Actually, I'm mostly just buying and selling stocks now, and I am in the process of just buying indexed mutual funds instead. No longer have the time nor interest to trade stocks and options like I used to.

[kv968]

Hey everyone!

So I am kinda new to the stock investing deal. Does anyone know much about short selling stocks. And if so, do you have any insights into this method of investing?

Any comments or advice is appreciated.

thanks!

Since you're new to investing I'd personally suggest that you don't short stocks. Heck, I've been investing for years and I don't do it myself. Not that there's anything inherently wrong with it but it can get messy.

If you buy a stock and it goes down, all you'll do is keep losing the money you initially put into it until you decide to get out. When you short a stock and it goes against you (goes up), if you want to keep the position on you may start getting margin calls where you'd have to add more money in order to stay in the position.

Granted you could just buy back the stock and close the position if a margin call is coming up but unless you add money to your account you won't be able to "ride it out" if you wanted to as you would be able to if you were long. So in other words, in that instance, not only is the position going against you, you have to add more money to keep it.

[MoneyTips4U]

Right, stock short selling is a strange concept and I suppose I should invest in the values of solid companies instead of hoping to invest in companies that will lose value.

I will definitely work more on regular stock investing than short selling for a while.

Thanks for the replies.

[bjl584]

As others have suggested, you should probably focus on learning about stocks and the stock market before attempting to play options.

[JBinKC]

First of all you need a margin account. Assuming you know this already I would never initiate past 5% short in a total portfolio value and would stick with dividend free themed stocks that appear price momentum tired and massively overpriced. Firms exposed to commoditization risk preferably in the fashion area that is heavily reliant on the product for profits is my favorite kind of stock to exploit.