Short selling is the act of selling a stock first and then purchasing it at a later date. The mechanism actually involves borrowing the shares to sell and then purchasing the shares at a later point in time to give back and cover the borrowed shares. This happens automatically in the current electronic age, although there are some thinly traded stocks that are hard to borrow and therefore hard to short. You must be able to borrow shares to short them. The goal of short selling is for the price of the stock to go down. It’s the same concept as buying a stock, just in reverse. If you sold short shares at $20.00 and the price declined to $15.00, you made $5.00. Shorting technically can have unlimited losses, as the price can go up to infinity; while when buying stock, you can lose only 100% of your investment, no more, as the shares can only drop to $0.
When I look at potential trading opportunities, I like to scan for stocks that have high short selling positions in them. These are the traders betting against the stock.
Now, while there’s always some validity to why a stock becomes a short selling target, it’s not always the case; this is where I see contrarian trading opportuni… Read More
In my view, Google Inc. (NASDAQ/GOOG) is tops in the Internet space, and a better play than Facebook, Inc. (NASDAQ/FB) and Yahoo! Inc. (NASDAQ/YHOO), based on my stock analysis. (Read “Facebook’s Hot, But Valuation’s Questionable.”)
At just over $700.00 a share, you may think the stock is expensive. On an absolute basis, a… Read More