Sell Short Stocks / ETFs

The investor sell shorts a stock because he believes it is going down in price. The broker 'lends' the investor the stock he wants to sell short. The investor pays the broker the necessary fees plus the dividends and interests during the contract. The investor can close (i.e. close the short) the contract with a profit or a loss depending on the closing price (the buy price). When the stock is rising during the contract period, the broker may ask the investor to increase his cash balance to protect the broker's 'loan'. It is similar to buying a stock but in the reversed procedure.This book describes the advantages and also the disadvantages in short selling. There are pitfalls you can avoid and how to protect your trades.Shorting ETFs are less volatile (meaning making less profits or less losses), maximum losses limited to the trade positions, and more diversified. Contra ETFs (same as inverse) has an extra advantage that you can trade in retirement accounts.Shorting stocks is more profitable but far riskier than trading contra ETFs. There are several tools that are free. Fidelity has a powerful tool, but it requires you to register with no balance requirement. Both Finviz.com and Fidelity offer a decent screener. This book provides suggested parameters to screen the candidates for short selling. Most of us only have time for a handful of stocks for further evaluation.Ideally we short sell larger stocks with decent daily volumes and trending down. Do not short the stocks that are trending up even the fundamentals are bad - most FAANG stocks belong to this category in 2020. I tend to skip stocks with high dividends as I have to pay for the dividends.Skip the screened stocks that have high insiders' purchases. Instead of short selling, I have bought these stocks several times and so far the result has been great. Review your short holding periodically. Cover the shorts when an objective or a maximum loss has reached.Unless the market is plunging, short selling should be a small part of your trades. Initial date: 10/2020
Last updater: 09/2021.
Size: 580 pages (6*9).