Hi, Cadaver. You might try to find a book called "When Stocks Crash Nicely", by K. F. Staley, 1991, ISBN 0-88730-497-4. The dedicated short player is probably a CFA type with an eagle (or vulture) eye for funny accounting. But they tend to be too early, as Staley admits. Even if there is fraud and sleeze, it might take awhile for the reality to set in.
I can't argue with success; if you are able to turn a profit in a general bull market, great. Sounds like a short term approach, but that may be the only avenue at this time.
My experiences with backtesting on Telescan indicated that a 'turnaround' effect can interfere with any longer term approach during a favorable market -- some of the weak perish, but those that survive or improve more than make up for the decline. So, there is a hit-or-miss aspect, and a statistical-longterm approach doesn't work, at least during generally good periods.
There is a theoretical attraction to longer term shorts, since they should be less well studied...most people are bullish, as SI demonstrates.
So, I suppose that a serious player would try to buy put options in order to play a short term overextension. You can argue that the list of option stocks has now expanded to include so many (>1000, I think) that there *must* be some that are about to blow up. It might be quite a job to identify 'em, but whenever the bear gets here, you might be well paid for the labor.
Regards, Logan |
