Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Non-Tech : LOCK (Saf-T-Lok) -- Ignore unavailable to you. Want to Upgrade?

To: Nietzsche who wrote (975)	5/23/1999 9:37:00 AM
From: Daniel Chisholm	Read Replies (1) \| Respond to of 1039

I'm glad to see Linden posting. As he points out, shorts are probably mischaracterized here. Because shorting a stock has a definitely fixed profit potential, and a vague unknown potentially large loss potential, shortsellers tend to be very cautious (at least the ones who live to fight another day). "Being cautious" means many things. One is to thoroughly research and understand the company and its prospects. It is not enough that the company "may" fail, successful shorters need to do enough research to develop far stronger conviction. One must also learn the very difficult task of following Mr. Buffett's maxim of "there are no called strikes in investing", and leaving the bat on the shoulder as many "somewhat" tempting potential shorts pass by. Don't swing when you think you can hit the ball, swing when you know you can -- it's just too dangerous otherwise. Another aspect of being cautious is in selecting the size of a position to short. This can be approached from at least two directions that I am aware of. First, a shorter can decide how much money he wants to make, and short enough stock so that if all goes according to plan, he makes this much money. The second approach is to consider how much he can afford to lose (and still stay in the game), how high the stock might possibly run, how long it might take to fall, how much more he might wish to short if the stock does soar (and no new information comes to light). In my experience, using method (1) makes good money when you're lucky, but it is very dangerous and imprudent, for it leaves a shorter very vulnerable to being squeezed. Using method (2) usually causes a shorter to enter a "disappointingly small" position, however it is a very safe and secure position to be in. The position can be (almost always!) held, defended, and sometimes even added to if the stock price soars. For what it's worth, being greedy (method 1) has always resulted in me losing money. Being somewhat fearful and cautious (pursuing method (2), which is what I try very, very hard to do these days) has resulted, I think, in 100% success for me to date (success meaning that I've never been forced out of a position or lost money) If a shorter enters a small enough initial position and the stock price slowly falls to zero, he experiences the "regret" of having not bet enough on a winning horse. On the other hand, if he initially shorts a very small position and the stock price moves substantially against him, then he needn't be fearful (since the position is small enough, it does not threaten his solvency), but rather he can afford to be thoughtful and consider whether or not he wishes to take advantage of the "opportunity" of shorting more shares at a higher price than he initially started at. Having a small position means that nothing is forced upon him, he can take advantage of the high price and short more (if he chooses), or he can simply stand pat and let the "storm" swirl around him. If there is one thing that I have learned since I started shorting it is that: Small positions tame storms. To be honest, I am somewhat surprised that there wasn't a huge rally on Friday. Having followed this stock (and been continuously short a very small position at $3.00) since October '97, I would have thought that the stock would see very high volume, and substantially higher prices than $4 this past Friday, in light of the discussions on this board and the apparent publicity that they's been getting. I don't know what (if anything) to read into the lack of price & volume action that both I and the longs were expecting. I recently (Wed 19 May 99) tripled my short position at $4.25. The reason I'm describing my trading actions is an attempt to demonstrate to the enthusiastic longs out there that many shorts are patient, and not very scared at the thought of a rising stock price. Just some thoughts from a (usually lurking) LOCK short. - Daniel

To: Nietzsche who wrote (975)	5/23/1999 10:07:00 AM
From: lindend	Read Replies (2) \| Respond to of 1039

Linden, three consecutive posts? What has you so concerned about your short position? There were three different rumors to dispel: 1. Short mischaracterization and stereotypes. 2. LOCK was going to be on CBS. 3. Gun legislation will help LOCK. I prefer to address each on different posts. Isn't this where you should be hoping for a rise so you can short some more? Yes, it would be nice as I only got 50% of my target position filled. As Daniel mentioned, smart Shorts gradually build up a position during the pump phase.