Another possibility for a bearish bet on an Internet stock
would be to open a bear spread, using either puts or calls.
The risk is well-defined, and the fact that you are selling
one option and buying another (in the case of a bear put
spread, buying the higher strike and selling the lower one)
helps offset the fact that the options are so pricey. Of
course, a spread also limits your potential rewards.
Shorting these stocks has nearly unlimited risk, and as
Michael Burke (and probably others) have said, if something
is overvalued by a factor of 10, there is no reason for it
to go to overvalued by a factor of 20, 40, etc.
I have no position in any of these stocks, but find the
phenomena interesting to watch.
Regards,
Zach |
