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Is there a safe way to short stocks?
Answers
2183 points
ChaosNantuko answered one year ago …
If the stock has high volume, and isn't announcing earnings or anything like that any time soon, then i'd say its safe to short it.
Note though that if you short something, you should use a stop loss. I would set the stop loss just above a line of resistance. So if your going to short PBR (illustrative purposes only. I am NOT recommending that), then you would put a stop loss order at 71.10 so you can't lose more then that if it does go up.
Overall, i'd say the amount of risk in shorting stocks overall is overexaggerated, as in a falling market such as this, its much safer to short a stock then it is to be long one.
4085 points
EthanR answered one year ago …
ShoeMan, check out the blog that Chaos and I wrote on this site, February 12, 2008. I believe the title was "A Systematic Approach To Shorting Stocks". To access it, you will have to click on "view more" under the blog list on the bottom of this page, then you will have to click on "previous entries" on the bottom of each blog page two or three times until you find it. Well worth the read and it will answer your question exactly.
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251 points
MichaelShulman answered one year ago …
I like incorporating short-side positions into my portfolio because short positions pay off much faster and with larger gains compared with long positions.
Shorting can happen in many ways: The outright shorting of a stock, buying puts, buying LEAPS, selling covered calls, selling covered LEAPS and so on.
My preferred method of playing the short side is using simple and easy to execute put options and LEAPS. Using puts means no more margin calls, frozen capital or night terrors.
123 points
CakeFinancial answered one year ago …
I wouldn't necessarily call it "safe" - perhaps "less complex" - by investing with short ETFs that cover sectors. SKF (short financials) and SRS (short real estate) are popular ones with Cake members right now.
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