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It's never the time to short a company, even a really bad one. You have only 100% upside, infinite downside, and you have to time it perfectly. A short can be a

It's never the time to short a company, even a really bad one. You have only 100% upside, infinite downside, and you have to time it perfectly. A short can be a part of a combination strategy where you go long on one company and short on a related one, but you still have to be really careful. If DB stock increases 50% before it crashes, would you be forced to sell at the top and lose all your money?

elliotec 7mo ago
> never the time to short a company > can be part of a combination strategy
- pocksuppet 7mo ago
  Never hold a net short position. You may hold a short position as part of a net neutral or net long position with extreme caution.
  - eru 7mo ago
    What you are saying suggests that there's a single number (that can be positive or negative) that characterises your net short or long position. That's silly. You can build pretty much any kind of shareprice-to-payoff function with enough options and other instruments. And that's one dimension (a line) more than just a single number. You can get arbitrarily more complicated, if you want to.
georgeecollins 7mo ago
This is sensible advice for most people. I see some thoughtful quibbles but I wish you weren't down voted. If you are a normal retail investor, please listen to pocksuppet.
- klodolph 7mo ago
  pocksuppet’s advice is I think more of a reaction to a specific way that you could take a short position, and in 2026 I think you want to assume that people who know what “short” means, also know what options are. The advice is good in a kind of stopped clock sense.
  - georgeecollins 7mo ago
    I'm old, so I am a stopped clock. However, I have invested my whole life including good times and bad. I believe that for a retail trader -- someone who doesn't get paid to trade other people's money-- options are bad. OK yes there are special cases like when your job requires you to hold a lot of one stock etc. I'm not going to make the case why here I am sure it has been argued to death. I do remember smart friends getting interested in options at different times in the last thirty years because they make higher returns. Then they have a period where make lower returns, or have a real problem. I don't think its worth the attention and the trading cost for most people, even people who understand what a short is. You can't argue with a person who has been doing really well with them for five years but it always seems like people stop.
    - klodolph 7mo ago
      My take on why options are bad—options are bad most people because most people don’t get use from hedging, don’t have enough information about the timeline of price movements, and all you’re left with is a form of gambling. A form of gambling that’s pervasive enough to worry me. People on Reddit trying to get rich with SPY options (how could you possibly know where SPY is moving?) Short positions are also bad, because there’s an ongoing cost to carrying a short position, and that cost is likely to cannibalize your expected gains. Lots of good reasons around to avoid short positions and options like they’re the plague. I don’t like the “unlimited downside” reason because it’s solvable. To people who are making lots of money in stocks or options… my question is always, “do you have high returns, or do you just have high volatility?” Because it’s easy to look at high short-term returns and believe that you’ve somehow beaten the market, when you’re really just holding a high volatility position that got lucky.
    - blueone 7mo ago
      > I do remember smart friends getting interested in options at different times in the last thirty years because they make higher returns. Then they have a period where make lower returns, or have a real problem. Volatility. Never trade options if you don’t understand volatility.
klodolph 7mo ago
“Shorting” a company does not just mean short selling stock. Instead, it means having a short position, which you can use without unlimited downside. The easy way is to buy puts. Maybe your next question is, “who is selling puts?” And that’s a good question, but you don’t really care, because you can buy your puts on the open market and when you do that, you get protection from credit risk. There are other reasons why this isn’t a good idea but “unlimited downside” is not one of them.
- iwontberude 7mo ago
  And puts are highly manipulated by MMs so you have to really study the chain and how it behaves before you have a chance to buy the contracts at a fair price. MMs will flood the market with contracts and devalue yours even when the price is moving in your direction. I highly suggest people think twice about trading options, they are best used as hedges for large positions during particularly vulnerable periods.
  - klodolph 7mo ago
    I’m not convinced. If you think you know what the fair price is for a put, then you can bid that price. If you don’t think you know what the fair price is, then you shouldn’t be trading options. There are reasons for not trading options, but the main reason is “you know less about price movement than you think you do”.
    - deleted 7mo ago
      [deleted]
    - pocksuppet 7mo ago
      Realistically, if you don't have the volume to be a market maker, there's no point bidding anything except the current market price. Either the price is higher than your bid, and your order won't fill (so why place it?) or the price is lower than your bid, and you should expect the market knows something you don't.
      - 7mo ago
laughing_man 7mo ago
Squeezing shorters is a national pastime in the US. You can lose a whole lot of money shorting a stock that objectively must go down eventually.
deleted 7mo ago
[deleted]
AdamN 7mo ago
Infinite downside is theoretical. The bigger problem that I learned a long time ago is that the leadership of every company is fighting against the stock going down. So if you're long a company then your interests are aligned. If you're short you really need to have conviction that it's a winning bet because everything else is fighting you. Also, it's a short term play - the short eventually needs to be unwound. So you're not just making a bet you're making one that's losing you money over time.

elliotec 7mo ago

> never the time to short a company > can be part of a combination strategy

pocksuppet 7mo ago
Never hold a net short position. You may hold a short position as part of a net neutral or net long position with extreme caution.
- eru 7mo ago
  What you are saying suggests that there's a single number (that can be positive or negative) that characterises your net short or long position. That's silly. You can build pretty much any kind of shareprice-to-payoff function with enough options and other instruments. And that's one dimension (a line) more than just a single number. You can get arbitrarily more complicated, if you want to.

georgeecollins 7mo ago

This is sensible advice for most people. I see some thoughtful quibbles but I wish you weren't down voted. If you are a normal retail investor, please listen to pocksuppet.

klodolph 7mo ago
pocksuppet’s advice is I think more of a reaction to a specific way that you could take a short position, and in 2026 I think you want to assume that people who know what “short” means, also know what options are. The advice is good in a kind of stopped clock sense.
- georgeecollins 7mo ago
  I'm old, so I am a stopped clock. However, I have invested my whole life including good times and bad. I believe that for a retail trader -- someone who doesn't get paid to trade other people's money-- options are bad. OK yes there are special cases like when your job requires you to hold a lot of one stock etc. I'm not going to make the case why here I am sure it has been argued to death. I do remember smart friends getting interested in options at different times in the last thirty years because they make higher returns. Then they have a period where make lower returns, or have a real problem. I don't think its worth the attention and the trading cost for most people, even people who understand what a short is. You can't argue with a person who has been doing really well with them for five years but it always seems like people stop.
  - klodolph 7mo ago
    My take on why options are bad—options are bad most people because most people don’t get use from hedging, don’t have enough information about the timeline of price movements, and all you’re left with is a form of gambling. A form of gambling that’s pervasive enough to worry me. People on Reddit trying to get rich with SPY options (how could you possibly know where SPY is moving?) Short positions are also bad, because there’s an ongoing cost to carrying a short position, and that cost is likely to cannibalize your expected gains. Lots of good reasons around to avoid short positions and options like they’re the plague. I don’t like the “unlimited downside” reason because it’s solvable. To people who are making lots of money in stocks or options… my question is always, “do you have high returns, or do you just have high volatility?” Because it’s easy to look at high short-term returns and believe that you’ve somehow beaten the market, when you’re really just holding a high volatility position that got lucky.
  - blueone 7mo ago
    > I do remember smart friends getting interested in options at different times in the last thirty years because they make higher returns. Then they have a period where make lower returns, or have a real problem. Volatility. Never trade options if you don’t understand volatility.

klodolph 7mo ago

“Shorting” a company does not just mean short selling stock. Instead, it means having a short position, which you can use without unlimited downside. The easy way is to buy puts. Maybe your next question is, “who is selling puts?” And that’s a good question, but you don’t really care, because you can buy your puts on the open market and when you do that, you get protection from credit risk. There are other reasons why this isn’t a good idea but “unlimited downside” is not one of them.

iwontberude 7mo ago
And puts are highly manipulated by MMs so you have to really study the chain and how it behaves before you have a chance to buy the contracts at a fair price. MMs will flood the market with contracts and devalue yours even when the price is moving in your direction. I highly suggest people think twice about trading options, they are best used as hedges for large positions during particularly vulnerable periods.
- klodolph 7mo ago
  I’m not convinced. If you think you know what the fair price is for a put, then you can bid that price. If you don’t think you know what the fair price is, then you shouldn’t be trading options. There are reasons for not trading options, but the main reason is “you know less about price movement than you think you do”.
  - deleted 7mo ago
    [deleted]
  - pocksuppet 7mo ago
    Realistically, if you don't have the volume to be a market maker, there's no point bidding anything except the current market price. Either the price is higher than your bid, and your order won't fill (so why place it?) or the price is lower than your bid, and you should expect the market knows something you don't.
    - 7mo ago

laughing_man 7mo ago

Squeezing shorters is a national pastime in the US. You can lose a whole lot of money shorting a stock that objectively must go down eventually.

deleted 7mo ago

[deleted]

AdamN 7mo ago

Infinite downside is theoretical. The bigger problem that I learned a long time ago is that the leadership of every company is fighting against the stock going down. So if you're long a company then your interests are aligned. If you're short you really need to have conviction that it's a winning bet because everything else is fighting you. Also, it's a short term play - the short eventually needs to be unwound. So you're not just making a bet you're making one that's losing you money over time.