Gaj: >i believe that stocks, over the 'long' haul, actually >lose money far more than make. It's just an interesting point and I will add too it something that few realize... Someone want to guess the number of NYSE stocks that have been *delisted* since 1992? JB
yes, but stops are never 100% guaranteed. if a stock halts for news pending, then i'd be definitely more nervous with a short position than with long. - jaan
jaan: >yes, but stops are never 100% guaranteed. if a >stock halts for news pending, then i'd be definitely >more nervous with a short position than with long. Hey Jaan, There are certain industries (biopharm etc) where I personally would not feel comfortable holding long term shorts as news can double them overnight. In the more traditional sectors I would much prefer to be holding short on a longer term trade than to be long. I describe it this way... How may different scenarios can you imagine where the indexes can RISE say 50% while you have no access to the markets (market closed or halted)? Now how many scenarios can you imagine where the indexes could DROP 50%? I can't think of many in the first, but I can sure imagine several terrorist and other events that fall into the latter. JB
Shorting is an art in and of itsself for sure. It is not for the faint at heart. Fighting the tape to early can be damaging. However, NGEN, ZIXI, RIMM@99.50 and a few others were great shorts, hell MAMA was a great short the last two days. I went against the tape on these......I was a little early on NGEN, and I reshorted RIMM twice, at 93 , pulled back to 88 covered and reshorted at 99.50 (underlyer prices i actually sold calls on on the postions mentioned.) I do trade both sides of the market and I find it far more "easyer" on the mind to go long...however, comfort is not always such a good sign. In fact, KBH i just shorted, taking a little bit of heat, but looking to short more of the homebuilders. I dont have anylongs at the moment, but if i see anygood ones, i will jump on them. QCOM was a great long on friday when i diped below 93, that one was pointed out by ROUGE TRADER during chat session. However, I personally dont wana be long when this maket gives way........thats for sure.
Soros makes the same point in "Alchemy of Finance". You can indeed make way more than 100% by shorting, if you use the profits to pyramid your position. However, the lognormal distribution (i.e. your shorts get smaller as they move in your favour, whereas longs get bigger) means that the odds are against shorting versus going long. Pyramiding a stock that goes from 10 to 100 is more profitable than pyramiding a stock that goes from 100 to 10. For that reason, I prefer to go short either for small moves (3% up is virtually the same chance as 3% down), or for very high probability plays.