alt Hacker NewsIt's never the time to short a company, even a really bad one. You have only 100% upside, infinite downside, and you have to time it perfectly. A short can be a part of a combination strategy where you go long on one company and short on a related one, but you still have to be really careful.
If DB stock increases 50% before it crashes, would you be forced to sell at the top and lose all your money?
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“Shorting” a company does not just mean short selling stock. Instead, it means having a short position, which you can use without unlimited downside.
The easy way is to buy puts. Maybe your next question is, “who is selling puts?” And that’s a good question, but you don’t really care, because you can buy your puts on the open market and when you do that, you get protection from credit risk.
There are other reasons why this isn’t a good idea but “unlimited downside” is not one of them.
Squeezing shorters is a national pastime in the US. You can lose a whole lot of money shorting a stock that objectively must go down eventually.
Infinite downside is theoretical. The bigger problem that I learned a long time ago is that the leadership of every company is fighting against the stock going down. So if you're long a company then your interests are aligned. If you're short you really need to have conviction that it's a winning bet because everything else is fighting you. Also, it's a short term play - the short eventually needs to be unwound. So you're not just making a bet you're making one that's losing you money over time.
> never the time to short a company
> can be part of a combination strategy
This is sensible advice for most people. I see some thoughtful quibbles but I wish you weren't down voted. If you are a normal retail investor, please listen to pocksuppet.