Hi KM; I tried to short EBAY, but it was on a down-tick. It turns out that I probably could have gotten in as it dived for a long while, but I have this incredible fear of being late to news plays. So if I don't catch it before it moves, I don't play it.
(Incidentally, I learned the above prudence the hard way. If you are late to a news play, you generally end up providing the profitable out to the guys with the fast fingers.)
A difficult thing that a trader must learn is to find an "edge" in some part of the market.
Having found an edge, the next difficult thing is to learn to play within that edge, while exploring other possibilities.
As far as stocks to short when their is bad news, the big caps with reasonably tight spreads and good liquidity are where I go. Same with futures moves, provided that the stock is actually on the futures. Up moves are a lot easier to get into than down moves, and are just as good.
I've known another profitable futures arbitrage type trader, (now trading in another state) who had slower fingers. He would long/short the second tier players on futures moves. For instance, XLNX on a S&P500 move. He also would short term arbitrage XLNX versus ALTR.
By futures arbitrage, I mean buying stocks when futures make a sudden run up, and shorting them in the reverse case. I know that a lot of you think that arbitrage is automatically done by computers and that humans are not fast enough to pull it off. I guess I will let you continue to bask in that particular delusion.
-- Carl |
