Short-Selling Poll
 

Many of you know that in my professional life I pretend to be a finance professor and that one of my primary research areas is short-selling. Anyways, I am curious so I created this poll. Obviously, it is not meant to be scientific.

The first time I did I kind of felt evil, like I was hoping that others would fail. In reality, it's a very healthy part of an efficient market. I currently own QID, which is short the QQQQ, it has been a nice hedge the last couple weeks, although I've still lost a lot. But I'm also 26, so I don't know why I care day to day.

For a real hedge, everyone ought to sell short in their own company. You get laid off because profits are down, but hey you just made some money.

Never shorted a stock directly. But I buy PUT options all the time.

I used to short sell on a weekly basis...
 

belonged to a day/swingtrading group and everyone in the group would have to submit a dog company with decent daily volume each week. We would all argue why our short position was the best call. We would vote on it and than take positions on the top two vote getters.

We usually stuck with garbage companies that lacked any real growth possibilities and were more often than not snake oil.

I took short positions on major tech companies for a client in Sweden back in December of 1999. I sweat major bullets while I saw unreasonable spikes in shares prices into late January. I was staving off margin calls almost on a daily basis. My client had ice in his veins. He just kept bankrolling the calls and by April he was smiling big while I was no longer regretting going to work. That was a tough go round.

I have had my head handed to me on short sells, especially in volatile markets where whipsawing just tears your principal apart. I have also had the good fortune of catching a bottomless raid on a few trades:

Basically I found a company whose investment finance strategy basically allowed for the major investors (AKA loan sharks) to take short positions against the value of converted debt. Usually this creates a bandwagon effect, and a sell off ensues. As the value of the stock drops, the number of shares to be converted increase. The major investors are able to reap huge gains on their loan while driving the share price into the pink sheets.

Once the share price has become next to nothing, the major investors call in their options/warrants and convert the debt. This basically wipes out the company since the major investors end up owning over 90% of the outstanding shares. These they sell off over time. They can use their position to leverage loans to effectively close their short position without having to cover. Than over a year or two they bleed out their long position in the company so that they can resolve the loan.

If they can get the company to file bankruptcy and dissolve, they never cover and they still win off the gains. If you ever purposely or by accident taking a short position on a stock that is currently in a bottomless raid, enjoy the ride. I have rarely seen a company strike out against such and turn the tide once the sell off begins.