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Monday, November 12, 2007

Shorting Against the Box

That is a very good article to read.

Here is an example.

You purchased 100 VMW @ 114.

VMW breaks support @ 104 can could possibly go to 96/93/85/82/73.

You don't want to sell VMW because you are already down 10 pts. But then if you hold it, it can go down further.

What you can do is short 100 VMW @104.

You MINIMUM loss is 10 points. Your maximum loss is unlimited.

Let's say you cover VMW at 84.

This wll give you 20 pts gain on the SHORT and 30 points loss on the LONG, net 10 pts loss.

HINDSIGHT IS 20/20.

No one could predict how low VMW can go. But if you look at the charts, the possibility of the stock falling to a price is more likely as the stock continues to break support and does not reverse course.

How many of your drives a brand new car paid for in cash and not have full coverage?

1 comments:

z-stock said...

f8
i started a new job, so im only trading part time..( I was actually trading part time before the job, just this time im not watching tv anymore) lol..
but today 5000 stocks were up
and 2000 down...
It's probably safe to short those 2000 or so...
that's all i got..
zee
i think Nov will still have some rough spots, but I'm sure yesterday was the low...
i see a 2% pullback in the qqqq and im in...

USO...I'm still working on that...bottom might be hard to nail down...but the oil pit analysts might give me a clue...so i'll check at bloombergs,,,fxstreet,,,etc