DWAC and BKKT have really kicked off the fall season. Lots of plays to short profitably as premarket euphoria is pushing stocks to unreasonable heights. LIDR, short worked out nicely. Was going to short BKKT but hesitated to buy the locates. Big drop. What's the saying? Penny-wise, pound foolish.
Never borrow shares to short a stock. You are gambling and the risk to the upside is unlimited. I buy put options provided that the bid and ask is narrow, open interest atleast 200 contracts, option does not cost too much, not more than $500 on my criteria. Then, let the trade ride. If I am wrong, I could lose $500 maximum but, can always exit before the options expiration. I can always save the remaining capital for the next trade. Reward to risk is skewed in my favor. I try to get $3 for every $1 of risk.
It depends on your risk management. Definitely have to make sure you are on the ball when shorting but in general, the high probability of stocks dropping is much better intraday when stocks move on (fake) news. Many small caps don't have options to trade. Part of "scam" that favors the big players on Wall Street.
Even if you have some risk management, shorting a stock---your risk to the upside is still unlimited. That is why you have short squeezes and people lose lots of monies. With options, my risked is capped on the cost of the premium. That is the most I can lose, whatever happens. I get it that a lot of stocks do not have options. In that case, I trade that stock only from the long side.
If you are going to be a daytrader, absolutely shorting small caps have to be in the arsenal. Less risky for daytrader since they are constantly monitoring their positions. To extract profits from the markets every day, you need consistent movers. Small caps do that. But yeah there was that famoud instance where Martin Shrekli took over a company and sent it skyrocketing. The story was that a number of brokerages had to eat losses due to daytraders not protecting the position. Options have their own set of complexities. Managing time and volatility costs can be complicated.
Options you have to just buy more time out in the horizon. Buy 3-6 months out. You do not know when the big move is going to happen so, just sit tight and hold. Your risk is already taken care of. Maximum risk is the cost of the premium, no matter what happens. Upside, is unlimited. I swing trade and trend follow stocks and options.
lol, if only it was that easy. Options have destroyed many more traders than straight equities trading. WSB folks can attest to that.
Wall Steet Bets is there to tout stocks. They do not teach anyone to trade. Most traders lose monies because they do not have a clue and yet, want to make millions of dollars with their $500 or $1000? Get real folks. They buy out of the money options which is dirt cheap for a reason. Odds are stacked against you sky high. Those who bought stocks in AMC and GME with encouragement from Wall Street Bets lost huge sums of monies just the same. Hedge funds though, made tens of millions easily on those same stocks. Those touting AMC and GME made their millions from Wall Street Bets traded options, why if it is that risky? No, these guys knew what they were doing. What I disagree with is the dishonest way these touts suckered the legions of gullible, retail traders to keep buying AMC and GME even at their highs.
But you get my point? Option as a vehicle is way more riskier than stock trading even naked shorts. You shouldn't tout the "limited" risk of options when it's full destructive force is waiting under the covers. Naked puts versus shorts. There is a reason why naked puts are outlawed at many places but not shorts. Buying expensive premiums on options only to have it washed away as your time deadline approaches is why call writing is like 80-90% success rate. But the option brokerage love them. I remember when iron condors were the sexiest thing around. Of course brokerages love them, double/triple commissions for all those option positions.