Hi Jen,
Short Interest - What is it?
Short interest is a reported public documentation of stock shares
that are being held in short accounts at brokerages. This record
is a public disclosure that investors can use to anticipate the
impact on the stock price. Knowing which stocks are being shorted will
give you an edge. Too much shorting slows the stock down and lowers
the price of the stock. That's useful info right? Now, when the short
selling ends and the price of the stock reverses (for what ever
reason!) then the shorted shared will be repaid. If MMs know you need
to cover your short position, they will jack up the price, right? So,
knowing when and which stock will be going through a "short squeeze"
is a bit of information that could make you a kahuna. Why? Because
you sure don't want to write CCs on a sitting time bomb stock that
may be going through a short squeeze!
So, say a stock was at $7.00 and I expected it to move down (BB and
RSI readings) I sell short 700 shares at $7.25 ($5,075.00) a week
later I covered at $6.00 ($4,200) = $875.00 profit. How? Well, I only
have to worry about "returning the shares I borrowed." What I pay for
them is my problem. So, in the above example I give back the 700
shares and pocket the $850 dollars for me. Now Jen! Why do you think
the market takes a dump every once and a while? Simple! There are
big bucks to be made when the stock moves down and the funds short
the stocks to cause a panic! The bigger the panic, the more profits
for the shorts! When does the dump come? Well, my friend! That is
were the VIX index comes in. It is a good predictor of those major
market dumps.
More Dialog on Short Stock!
Short selling is the selling of a stock security that the seller (you)
does not own, or any sale that is completed by the delivery of a
security borrowed by the seller. When you sell a stock short you are
technically increasing the liquidity of the stock. That is, you are
increasing the outstanding float. It's like printing I.O.U.s that you
have to pay back.
Short selling is a legitimate trading strategy. Short sellers assume
the risk that they will be able to buy the stock at a more favorable
price than the price at which they sold short (borrowed). The Nasdaq
Short Sale Rule prohibits NASD members from selling a Nasdaq National
Market stock at or below the inside best bid when that price is lower
than the previous inside best bid in that stock. In other words, you
need an up tick in order to short that stock at that new price.
December List of Highest Short Interest
Month of December largest short interest!
1 WCOM MCI WORLDCOM Inc. 35,375,653
2 DELL Dell Computer Corporation 27,996,107
3 CSCO Cisco Systems Inc. 25,863,921
4 TCOMA Tele-Communications Inc. 21,655,253
5 AAPL Apple Computer Inc. 21,002,216
6 INTC Intel Corporation 19,819,474
7 MSFT Microsoft Corporation 18,441,149
8 ASND Ascend Communications Inc. 17,783,175
9 BAANF Baan Company N.V. 16,149,375
10 SYQT SyQuest Technology Inc. 14,873,997
11 BOSTQ Boston Chicken Inc. 13,857,540
12 HBOC HBO & Company 13,433,402
13 TALK Tel-Save.com Inc. 13,046,471
14 LBTYA Tele-Communications Inc. 12,886,862
15 ORCL Oracle Corporation 12,884,280
16 PSFT PeopleSoft Inc. 12,341,828
17 PETM PETsMART Inc. 12,287,347
18 GENZ Genzyme General 12,263,832
19 NETA Network Associates Inc. 11,996,574
20 NXTL Nextel Communications Inc. 11,967,392
As far as VIX? Unless you are really trading and timing stocks and
writing/buying options on a daily or weekly time span, don't worry
about the VIX!
The VIX is usefull for those that wish to take advantage of major
market corrections as part of their tools. They are active traders. |
