.....To: Early Bird (70 )
From: William W. Dwyer, Jr.
Wednesday, Aug 26 1998 8:10AM ET
Reply # of 71
Hi, Derrick
I'm certainly no expert, but thanks anyway. However, in my experience, as long as your
broker has sufficient shares available (inventory) of the stock you want to short (the
broker will allow you to "borrow" the shares to sell short), you can short the stock. Of
course, the stock must qualify in other ways, too.
The stock generally must have a trading price of $5 or more, cannot be an IPO for, I
believe, the first thirty days, and your account must be approved for margin. If so, and if
your broker has, or can borrow for you, the shares you want to short, then you can do it.
That is my understanding.
Shorting, especially for extended periods, is considered by many to be higher risk, so you
probably would do well to short a limited number of shares, whatever level you can be
comfortable with, probably for shorter periods of time (e.g., daytrading), and have a good,
valid, specific reason to short the stock, not something like "gee, I think this stock is
over-valued." What does the market think of the stock? And, why? That's the big
question.
Oh, regarding shorting less than 100 shares, I don't see any problem. It's probably more a
matter of your broker's policies. You might contact your broker to get a more definitive
answer. However, shorting less than 100 shares, maybe even less than 1,000 shares, is
risky in that, in order to make a profit your stock has to drop in share price quite a bit,
which is asking a lot and would take longer in time, subjecting you to more market risk in
the meantime. All in all, not a great idea in this uncertain market.
I like to pick stocks going up, in a market that's going up. Otherwise, if I short, it's because
BIG negative news "just" came out on the stock and it's going down, hasn't gone down too
much already, and I am only short for a matter of minutes, watching the stock and the
market continuously while I am short, ready to cover in an instant, satisfied with a small or
modest profit.
Good luck!
Bill
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