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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: KeepItSimple who wrote (69499)2/21/2001 8:18:20 AM
From: Earlie   of 436258
 
KIS:

Nice piece of work. (g)

Glad to see that it has worked out so well for you, but frequently, lengthy maintenance of specific short positions may not be the best way to deal with risk management. When one shorts a stock at any price, the main consideration should be "expected percentage gain over time". Frequently, a stock will drop a given percentage (say 50%) in value over a much shorter time period and at much reduced risk after it has already taken a major hit. I have actually shorted a stock at a nickel (knew it would literally "disappear" the next day due to a bankruptcy court ruling). That provided a 100% gain over a remarkably short time frame and at very low risk. A rarity, but you get the idea.

On a related topic, it makes sense to me to take profits from short positions on nasty days for similar reasons. Given the general propensity of folks to "buy the dip", one can generally expect the really nasty days to be followed by considerable retracement from dip buying, which provides one with another opportunity to ride. JNPR is a good example of this.

The lowest risk situations in the current environment to my mind are the stocks that have already experienced a tumble from "darling status" and that are badly encumbered with large debt.

Best, Earlie
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