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Maybe companies that went public via SPAC are going to become attractive targets for short sellers? I know Matt Levine has been writing about how SPACs can mar

Maybe companies that went public via SPAC are going to become attractive targets for short sellers? I know Matt Levine has been writing about how SPACs can market their "upside" without the normal scrutiny that an IPO would bring. Any of our HN readers playing around with shorting the stock of public companies as an individual investor?

AlexandrB 5y ago
> Any of our HN readers playing around with shorting the stock of public companies as an individual investor? This seems really risky without any institutional backing. If the market is volatile or "irrational" (WSB + GME for example), you can be margin called and lose a lot of money even if you're eventually right. Unlike a normal equity you can't just hold your short through volatility.
- gregwebs 5y ago
  You can buy a long-term short with cash rather than margin. You can hold onto such an option until it expires. Options have a reputation for risk, but this mostly seems to come back to using margin.
gregwebs 5y ago
Shorting is a more time consuming investment approach. You need high conviction to open a PUT without owning a CALL or the stock as well. One thing I have learned is that a SPAC or any company with a low stock price may have low liquidity, particularly for longer-dated options. This risks making a short position dramatically less profitable. So SPACs end up not being the gold mine for shorts that you might expect. For me a short position is not about speculating but instead about being strategically "long volatility". Which means you can actually make money when the rest of your stocks (which are "short volatility") are tanking and provide a better return for your portfolio. So I now try to always have PUTs open (along with CALLs that balance each other out). Don't buy your short position with margin: that introduces short volatility to what should be a long volatility position.

AlexandrB 5y ago

> Any of our HN readers playing around with shorting the stock of public companies as an individual investor? This seems really risky without any institutional backing. If the market is volatile or "irrational" (WSB + GME for example), you can be margin called and lose a lot of money even if you're eventually right. Unlike a normal equity you can't just hold your short through volatility.

gregwebs 5y ago
You can buy a long-term short with cash rather than margin. You can hold onto such an option until it expires. Options have a reputation for risk, but this mostly seems to come back to using margin.

gregwebs 5y ago

Shorting is a more time consuming investment approach. You need high conviction to open a PUT without owning a CALL or the stock as well. One thing I have learned is that a SPAC or any company with a low stock price may have low liquidity, particularly for longer-dated options. This risks making a short position dramatically less profitable. So SPACs end up not being the gold mine for shorts that you might expect. For me a short position is not about speculating but instead about being strategically "long volatility". Which means you can actually make money when the rest of your stocks (which are "short volatility") are tanking and provide a better return for your portfolio. So I now try to always have PUTs open (along with CALLs that balance each other out). Don't buy your short position with margin: that introduces short volatility to what should be a long volatility position.