This was a faaantastic , and intelligent piece of work! Makes me realise I have to WORK HARDER!!

Thanks alot for sharing this with us Mr. Ponzio!

I think shorting works best when you have a fundamentally unsound company selling at a high valuation. So the Apples and Googles of the world certainly won’t fit into this category (at least for the time being).

Another critical reason for not shorting, and sticking to underpriced companies, is that an underpriced stock can only go “up” eventually..sure it can move down (which is great buying opportunity further reducing your cost basis) ..or It can move sideways, but time value works in your favor, as the earnings would keep adding up, until the market eventually notices its value.

But an overpriced short could conceptually move sideways for a long time until its earnings eventually “catch up” with its valuation. So when you short, time value actually plays against you.

We all know that markets can stay irrational longer than we can stay solvent. A short’s downside is theoretically unlimited, as the stock could climb and climb and climb. So if you must short a (very) overpriced stock, its probably better to buy a put, where your downside is capped to the option’s price.

Jay