Unfortunately, the strategy's not a lock even if you're right on the fundamentals; quoth Keynes, "the market can remain irrational longer than you can remain so

Unfortunately, the strategy's not a lock even if you're right on the fundamentals; quoth Keynes, "the market can remain irrational longer than you can remain solvent." Concretely: If a parade of idiots bid up the price for no good reason whatever, the price is still going up, and you're still at risk of a margin call because of it. (Accounts with short positions are (quoth investopedia[1]) typically required to own securities worth at least as much as the shorted shares, and typically 30-40% than that. If the value of the shorted shares goes up, you can be required to give the broker more cash to meet this margin requirement, or close out the position immediately at a loss. So, if a stock is getting bid up by crazed fools, and you think it's the next Enron, you can still go broke shorting it even if you're right, unless the crazed fools come to their senses before you run out of money to cover the margin requirement.) [1]: http://www.investopedia.com/ask/answers/05/shortmarginrequirements.asp http://www.investopedia.com/ask/answers/05/shortmarginrequir...