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I've been burned by this before, especially by the margin requirements for a short-sale. It doesn't matter how confident you are a stock will crash, because if
by smackfu 15y ago
I've been burned by this before, especially by the margin requirements for a short-sale. It doesn't matter how confident you are a stock will crash, because if it keeps going up, eventually you will either need to sell at a big loss or add more money to keep up. And it's very tempting to short even more as it continues to go up, since you'll make even more when it crashes! And then you run out of money and are screwed.
In general, it's not a good idea to start from "this stock is priced illogically" and then apply logic to it.
- ScottBurson 15y ago"Markets can stay irrational longer than you can stay solvent." -- Keynes
- unfletch 15y agoI agree with the sentiment, but the quote is misattributed. It was probably first said by Gary Shilling, a writer for Forbes, in 1993: http://quoteinvestigator.com/2011/08/09/remain-solvent/ http://quoteinvestigator.com/2011/08/09/remain-solvent/
- ScottBurson 15y agoWow. Funny how these things take on a life of their own. A lot of people now think Keynes said that.
- bwhite 15y agoIn a couple weeks, options will be available on the stock and you can buy puts. The upside isn't as good but the downside is capped instead of unlimited.
- comedian 15y agoput option terms only last for 3-9 months. you can use LEAPS which are long-term option contracts with a 2+ year expiration.
- ww520 15y agoWait until the lockout period for the employee options expires, like in 6 months, then short it hard. Do it like 2 months beforehand because everyone else is thinking the same thing.