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Varchild2008 (84.39)

SHORT your own Portfolio

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February 03, 2009 – Comments (4) | RELATED TICKERS: ATVI , AMAT , CAG

I'm still a NEWB investor here and so take this advice worth a grain of salt because I don't know anything.. not until I at least have 1 full year of experience.... That won't happen till March.

But... In a Bear market that may stretch at least till Q4 2009 if not Q2 2010,  why not SHORT your own Portfolio?

Say you have 5 stocks...each at 100 shares give or take.

With the rest of your cash on the sidelines, take about 50% of it to SHORT your underperforming stocks in your portfolio.....and the other money can be used to add to any positions you are LONG on off any dips.

For example:

AMAT)   SHORT This one due to pre-announced bad earnings report

CAG)   ADD to your position on any DIPS if you continue to believe low commodity prices for ConAgra will continue into the next Quarter and so on, bringing good earnings.

Simple right?  Or am I mistaken?

Does it make any sense to SHORT your own stocks?

I guess.... If you are shorting your own stocks.... why are they your own stocks you may ask?
Well... I donno.. Maybe they shouldn't be... But maybe you simply want to earn some CASH off of shorting so you can buy shares of an underperforming stock much cheaper later on in the far, far, future... because in the far, far, future you have an optimistic outlook for the company?

For example... Activision struggled badly for years before becoming a market leader....  So, just cause you short Activision during the bad times doesn't mean you eliminate yourself from participating in Activision when things start to look good?  You cover your Short and move that stock to a "BUY" when news is good.

Just wondering if this BEAR MARKET Strategy is something I should start getting into this year.

DISCLAIMER:  I own 250 shares of AMAT,  435 Shares of ATVI,  0 shares of CAG.

4 Comments – Post Your Own

#1) On February 03, 2009 at 10:02 AM, EggplantWizard (99.67) wrote:

There would be no reason to do so (incurring costs to short) -- If you feel strongly about trying to take advantage of short-term swings in your positions, you should close them out, and re-buy later if appropriate.

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#2) On February 03, 2009 at 10:38 AM, Schmacko (91.97) wrote:

It sounds like you want to be both short and long on a stock at the same time.  I don't think that's possible.  Example- if you have 250 shares of AMAT you can't short AMAT, you'd just sell your exising shares.  You could use options to set up a simialr hedge.  For example buying puts on AMAT.  Then if the price drops further you could exercise your puts to sell your shares at the higher price (if your puts are in the money).  

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#3) On February 03, 2009 at 3:50 PM, Varchild2008 (84.39) wrote:

Good to know.... I sold off all of my AMAT shares in favor of Wide Buying into FLIR.  Wish me luck!  Feb 5th = Earnings Report... Stock took a plunge off a short term massive Contract Miss issue.

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#4) On February 03, 2009 at 4:07 PM, StockSpreadsheet (74.49) wrote:

You can short a stock you own.  It is called a "covered short". 

If you think your stock is going down significantly, you might want to sell your shares and then possibly short the shares.  That way you get the current higher price for the shares and get to profit from your short.  Once you close out the short, (at the lower price), you could then rebuy the shares you sold at a lower cost basis. 

I don't short, so I am not sure about the taxes on this trade, but I believe the info is correct.  

If you want to make more money on your shares that you hold, you should look into put and call contracts.  They potentially allow you to make more money off of your shares while still holding them.

Personally, I would rather just hold the shares I like and wait for the market to turn around, but that is just me.

Good luck with whatever strategy you employ.

Craig 

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