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Strategies & Market Trends : ZixIt Corporation (ZIXI)
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To: Kevin Podsiadlik who wrote (1309)12/16/1999 12:08:00 AM
From: Integral  Read Replies (4) of 4120
 
I think that a discussion about risk management and trading strategy for folks with a short position (like myself)would be useful. The chances that ZIXI will be trading at a small fraction of its current price within the next 12 months appear to be excellent. However, we need to consider what is likely to happen in the interim.

The fundamental problem with a stock of this sort is that the higher it goes the more likely it is to keep rising. It is purely a trading vehicle. I doubt that many of the longs consider that ZIXI's long-term prospects justify its current stock price. But in the current climate, stocks can move upwards violently before crashing.

Perhaps some of you on the board would like to comment about your capital allocation and strategy. What percentage of your investment capital would you place in a short position?

If the stock starts moving up (in what is likely to be its last gasp), what do you do then? The value of my short position (sales price of shares) as a fraction of my capital is currently 3%-4%. While this sounds conservative, if ZIXI moved up to say $100, I would then be at a level of 5%-6% (at a substantial loss). Probably that would be just the right moment to increase my short position from a trading standpoint. I would, however, be reluctant to do so from the standpoint of risk management.

Aside from these general issues, what do you all think is the likely scenario for ZIXI in the next few weeks in terms of company announcements and stock price movement. I would like to develop a good strategy. This looks like an excellent opportunity on the short side, but one with considerable risk if played incorrectly. Has anyone called ZIXI investor relations to ask for the official line on the promised major announcements?

I think that a discussion along these lines might be more useful than providing even more evidence of the questionable nature of ZIXI's current business strategy.

I take the overvaluation of ZIXI stock as a given, but that doesn't explain how to profit from the situation.
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