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Strategies & Market Trends : Rande Is . . . HOME -- Ignore unavailable to you. Want to Upgrade?

To: Mike M who wrote (53838)	8/5/2001 1:58:24 AM
From: Rande Is	Respond to of 57584

Mike, as you know, there is no theoretical limit to the losses a short-seller may take. A stock catches news and explodes, like many have done in the past few years, and a short-seller could very easily be looking at a sudden loss in excess of 100%. And as you probably realize, when playing long, you can only lose up to 100%. However, when playing short, you can lose several hundred percent in a margin call. . . and it can literally happen in a matter of a few days. Liquidation generally carries a prior 3 day notice, though it may happen at any time. But on a short play where a stock surges ahead 300% in a few days, all the brokerage house can do is take everything. . . .so you end up owing. Now I hate to bring this up, but all the yelling and screaming about longs losing various percentages slowly over the past year and half could be nothing when compared to the anguish that some short-sellers may face should the markets suddenly surge ahead in a big way. It's one thing to hold ATHM short from $140. . . the upside is obviously quite limited, so the risk is low. However, when the same stock is at $1.40, short-selling could be extremely risky, since a squeeze on great news could see the stock back over $5 in a single day. So many common folks have learned to short-sell. . . .yet how many of them profitoften? or use money management?. . .or even realize the risks involved? Will they hold short too long the same as some longs held too long? Let's hope not, as the damage could quickly eclipse the worst of the long horror stories. [And the media will no doubt be there to report the horror. . .>smirk<]. I have difficulty imagining orderly short-covering should we get a sudden rally with legs. . . burst or otherwise. So at this point in the market, playing stocks under $10 may be risky in either direction. Especially come October. So ProfitOften and don't let go of your gains. Rande Is