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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Earlie who wrote (172843)6/14/2002 3:23:03 PM
From: reaper  Read Replies (2) of 436258
 
Earlie -- a most fabulous post. The best time to short is when the business is "terminal". Oh have I enjoyed the recent terminations of MM, CNC, SITE and ENE (with many more to come I am sure <g>). Enron for example was no where near "too low a price" when the stock was $10.

<<A good short is (or should be) interested in what his PERCENTAGE gain might be, over what length of time. The guy who shorts at $50. and clears at $25. has exactly the same percentage gain as the guy who shorts at $10 and clears at $5. >>

I'm going to modestly dis-agree with this statement, as people mis-understand the percentage gain you can make on a short. The BEST short is a terminal business where you're in early and then pile on on the way down. Take Metris for example. Say I short 1000 shares at $40 back in 2000; total capital invested is $40k. Stock drops in half to $20. But the fact that the stock is going to zero is not changed by the fact that the stock has been cut in half. But I now only have $20k capital committed (1000 shares @ $20). So to get back up to $40k capital committed I short another 1000 shares. Then the stock goes to $10. Back down to $20k of committed capital, but the stock is still going to zero. short 2000 more shares. Finally the stock goes to $5 (sufficiently close to zero) and one clears out. Total profit on $40k capital committed is $60k, or 150%.

Cheers
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