I can short the
stock directly in my margin account or I can buy Put
Options on the stock at
a fraction of the cost and risk.
You need to
understand
margin and
its use before you short a stock.
YOU MUST CHECK WITH YOUR
BROKER!!
As a trader you MUST learn to trade both sides of
the markets otherwise you leave a lot of money on
the trading table that should be in your
pocket. I guarantee you it will end up in
someone's pocket.
Shorting a stock is no mystery. You sell it
first and then buy it back to close your
position. The exact opposite of buying low and
selling high. |
Short Stock Position
- a position initiated by selling stock in an opening transaction with the goal of buying it later at a lower price (i.e., sell high, buy low). To accomplish this, the stock must be borrowed from a broker-dealer before it can be sold.
You may only short a stock in a margin account, therefore there is an
additional risk taken when shorting. Review your broker's
guidelines for using margin.
More
on Shorting...a lot more, click here.
also:
www.trade10.com
You can stay "short" as long
as you want, as long as your margin limits will allow
and/or your broker doesn't call the stock (see your brokerage contract
re:shorting) and margin requirements. There are carrying cost as
well, which is another reason I prefer to use Put
Options.
The point is that the market does not
only go up, and thus shorting is profitable too.
Why miss half of the market action?
Think about it.
To
trade successfully you will NEED to know how to short or use Put
Options and what
to look for in the charts.
After all, the markets don't only go
up, do they?
The Mechanics of
Shorting
-
Trader decides
to short a stock
-
Places order to
"open" a position with a "sell 1000 xyz" order
-
Broker
"loans the stock to you
-
Your portfolio
will show a 'short' position of -1000 xyz or (1000) xyz
-
You must, at
some point, buy back the stock with a "buy to close" order
to "close" your position. Automatically, the stock
is returned to the broker and you keep the gain or loss.
|
