Sheri,
I think the uptick is on the stock price.. My (guess) is that if AOL is grossly overvalued, if the DOW or some other widely publicized index drops, people in these overvalued stocks will panic, sell, and force them to drop. I'm guessing there may be a slight time lag between the index drops and AOL does.. Thereby creating a good opportunity to Short AOL - ie., 'sell' 1000 shares (that I don't own) of AOL at 123.75, making $123750.00. If AOL then behaves like I hope it will, it's price will drop to, say, $105. I would then take the opportunity to buy 1000 shares, for $105,000, to replace them with the broker I had borrowed them from.. The net result is a $18750 profit,
less commisions and ? margin requirements ?. At least, this is how I think it works... I've never short sold (eg, what if it went to $140 per share instead...), but have traded in options several times - because there you can absolutely limit your risk.
Ron |
