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Strategies & Market Trends : SHorting Stocks: Education/strategies/techniques
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To: Sturgeon who wrote (86)5/15/1997 1:03:00 PM
From: Anaxagoras   of 99
 
I just have a moment to write here, so this is brief.

(1) Some brokerages do give interest on proceeds from short sales, e.g. Aufhauser.

(2) Shorting is a Short term strategy. Some reasons:

(a) if the stock pays dividends, you don't want to keep having to keep paying them each quarter.

(b) The long term trend of the stock market is up, so the odds are against you over the long term.

(c) Shorting is typically bounded by an event which in practice is short term. Just a few examples of such events are the following:

(i) the release of expected crappy earnings

(ii) pending bad news event

(iii) expiry of lock-up dates for insider trading

(iv) conversion of preferred stock or debentures into common with subsequent selling on a certain date when a certain filing, say an S-3, is deemed effective by the SEC.

(v) shorting at a blow off top

Anaxagoras
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