tbul@trsvax.UUCP (08/31/84)
#N:trsvax:52900019:000:2623 trsvax!tbul Aug 31 12:32:00 1984 SHORT SELLING ------------- O Never go against the market. In other words, if a stock goes up drastically, don't short it. Often such market strength is followed by a rise in earnings. O Overpriced stocks often soar even more overpriced, so beware. O Do not short stocks that are not highly traded. All too often, these issues can be manipulated by the largest block owners. O Do not short stocks with large assets behind them. Due to a bear market, the price will fall and its price may lead to a takeover bid. Should these stocks become takeover candidates, the stock price will probably rise. O Do not short stocks with large dividends. In a falling market, the dividend will act as a floor for the stock price and will minimize the profit from a short position. O Be patient. A short position could be held for several years before a profit occurs. O Do not invest all of your portfolio in a short position. Allocate just a portion of it to a short position. O Short more heavily when others are confident, reduce the short position when others are unsure or downright panicky. Practice contrary opinion. O Do not allocate more than 50% of your portfolio to short sales. This will cushion margin calls (as you have security that you can use as collateral). O Short the has-been glamor companies, those that have riden the highest in price and are now falling. Since they rose up on their glamor status, they will now fall because of the lack of it. O Watch for earnings of companies slowing down. Their prices probably will drop, their glamor status is decreasing and a fall in stock price might be on the horizon. O Watch the institutions. Are they beginning to pull out of a stock? O Reevaluate your position often. Are the reasons that you are shorting the stock now the same as when you first bought? Should the reasons the short fade, consider covering your position. O Have you admitted making a mistake? Why not cover the short? O Never short in a bull market. O Have you given enough time for your short position to take hold? Have patients and give it some time. Above all, stick with your convictions so long as your basis for shorting the stock remains valid. O Should the company pay a dividend, you must pay the dividend to the person you borrowed the stock from. O Margin calls should be a tool of caution used by the investor. When you receive a margin call, reevaluate your position and make sure that the reasons that you shorted it are still sound. O If the stock is put on the 100% margin list, also use this as a tool for caution.