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Shorting the Market 101 Editor’s Note: Many people wonder if there is any way to make significant money in falling markets without trading options. Today, we’re giving you one extra tool to battle this volatile market. This tool — along with buying penny stocks — is all you need to take on whatever the market throws at you. Enjoy… The Long and Short of Shorting Stocks
Huge Profits on Falling Markets Shorting is one of the best ways to profit from the downside of an investment. Anyone can make money when the market’s doing well, but profiting from a plummeting stock market seems foreign to most investors. If done well, you can increase your wealth no matter what the market is doing. So, how do shorts work? Ask our resident short selling expert, Dan Amoss, CFA…
In other words, instead of the “buy ‘em low, sell ‘em high,” philosophy most investors are used to, you want to sell high first, then buy the stock back later when it’s cheap. See, it’s simple enough. In a minute, we’ll tell you how to actually go about doing it… ********Introducing the “Oil Vacuum”******** The Best Way to Tap an American Oil Reserve 3 Times the Size of Saudi Arabia’s Time named the “Oil Vacuum” one of the Best Inventions of 2007. And the U.S. Department of Energy says the only company that has it could be key to unlocking an 800 billion barrel oil deposit in the Rocky Mountains. It could make you $65,500 inside of a year. But time is short. This “Oil Vacuum” will produce oil by May 31, 2008... Read this now… ***************************************** Buying on Margin The first thing you’ll need to short stocks is a margin account — a special account that you can use to borrow money from your broker. To open a margin account, regulators require you to deposit at least $2,000 to start off, and use 50% margin. But just because you want to short a particular stock doesn’t mean you’ll be able to every time… “Depending on you brokerage, it may or may not be able to ‘locate’ shares for you to sell short. If so, the brokerage will notify you that it has a restriction on selling short when you try to enter your order,” says Amoss. Usually, this doesn’t happen. If it does, Amoss suggests calling up your broker to see if they can locate shares of the stock for you to borrow. Watch Out for Short Squeezes Shorting can sometimes have a noticeable effect on the share price of a stock, depending on how much short interest, or the total number of shorted shares out there, exists. You can find a stock’s short interest by going to any stock research website and checking out the key stats section. Lots of investors see high short interest as a sign of two possible things — one, that there isn’t a lot of investor confidence in the stock, and two that the price is due to rise. So, how would investors shorting a stock make the share price rise? It’s because of a thing called a short squeeze. In a short squeeze, more and more investors want to short a stock, increasing the demand for the stock and increasing the price. As the price rises, more and more of those short sellers get nervous and cover (or are forced to cover), and end up buying back enough shares that they keep pushing that price on up. ***************************************** Penny Stocks Beat the Pants off of Large-Cap Stocks Year In and Year Out The best-performing stocks on the market are companies with tons of cash...groundbreaking products...and growing businesses — the same stocks that have proven to be the BEST investments over the last century. The one thing that makes these stocks different is...they’re still small enough to make them affordable for small investors to make a grab for their share of the profits! Get in now, and be the first to see what the next two are… Read on… ***************************************** What Are the Risks of Shorting? As with any investment with huge profit potential, shorting stocks doesn’t come without its risks (like the short squeeze I just mentioned). Chief among them is the risk that the stock’s price will actually go up instead of down. When you buy a stock hoping it’ll go up (unsurprisingly enough, that’s called a ‘long’ position), your biggest risk is that it’ll fall in value. If you’re long a stock, the lowest it can go is $0. If you’re shorting a stock, on the other hand, there’s theoretically no limit to how high its price can go. If you short a $5 stock that rockets up to $25, you’ll be out a ton of money. But, that doesn’t mean that you’ve got unlimited risk when you short stocks You see, the chances of that $5 stock shooting up to $25 before you get a chance to cover your short are slim to none. Because most stocks typically don’t fluctuate by huge percentages in one day, you’re not facing potential destruction when you short — if you’ve done your homework, that is. Cheers, P.S.: While we aren’t in the market to recommend short plays, we work with those that are. In fact, one of our colleagues has been extremely successful over the past few months. With gains of 92.2% and even 173.3% so far this year, it’s pretty clear that this is a tool investors should be aware of. You can check more out in this special report. Editor’s Note: If all of this still sounds a bit too risky, or it’s just not your cup of tea, then I have something for you. Our friends over at EverBank have put together something absolutely extraordinary. It’s a low risk way to grow your money in very lucrative markets. Check it out here... |
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