Short Stock vs Selling other instrument

T

Trader_Herry

1)
How do you comapre between shorting stock and selling other instruments like futures? Which is the better way to pocket money when the price is falling? Why?


2)
What do I need to pay attention when I short stock in US market?


3)
Is there any material or tutorial which teaches us about shorting stock? I would like to learn what extra I have to know between 'simple buying and selling' and 'shorting stock'?
 
When you short your broker has to borrow the stock from someone. There may be a problem for him to do that.

Some stocks can only be shorted on an up tick. ETFs don't have that rule.

If you are short, you are responsible for paying dividends and other corporate actions that affect the stock.

In my opinion, futures are easier to play on the short side.
 
Quote from semiopen:

When you short your broker has to borrow the stock from someone. There may be a problem for him to do that.

Some stocks can only be shorted on an up tick. ETFs don't have that rule.

If you are short, you are responsible for paying dividends and other corporate actions that affect the stock.

In my opinion, futures are easier to play on the short side.
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I think all shortable stock has the uptick rule. Am I correct?
That means I can only short stock at best ask. I can't take the best bid. Is that what the uptick rule means?

Since selling futures/options do not have restrictions like shorting stock has, what's the point of shorting stock? Why or when should we short stock?

What about stock futures? How does it compare with shorting stock?
 
I think all shortable stock has the uptick rule. Am I correct?
That means I can only short stock at best ask. I can't take the best bid. Is that what the uptick rule means?

NASD stocks are (or used) to be slightly different than listed, in that they didn't have to actually uptick but the bid would have to have a positive change (I think). ETFs can be shorted on a downtick but some brokers will restrict shorting in some stocks and etfs, based on supply of shares to borrow.

Since selling futures/options do not have restrictions like shorting stock has, what's the point of shorting stock? Why or when should we short stock?

Options do not have the same liquidity as stock in addition to having different characteristics (premium, time decay, etc ). Buying a put and selling a call is a synthetic short. Shorting stock is useful in that it mirrors the actual stock exactly and may have less cost than taking an option position. It is probably better to short futures than the equivalent index etf although the new short ETFs (like QID) are interesting.

What about stock futures? How does it compare with shorting stock?

Stock futures are not as liquid as stocks. Therefore one may have technical problems getting a good price on entry and exit

Basically it is a matter of style or something based on the strategy.
 
Quote from Trader_Herry:

1)
How do you comapre between shorting stock and selling other instruments like futures? Which is the better way to pocket money when the price is falling? Why?




2)
What do I need to pay attention when I short stock in US market?


3)
Is there any material or tutorial which teaches us about shorting stock? I would like to learn what extra I have to know between 'simple buying and selling' and 'shorting stock'?
More...

1) Most retail accounts do not receive short stock interest, the broker basically "steals" it.

2) see #1.

Shorting stock is just like buying stock, only backwards (not being silly, it really is)...we simply think of it as "entries and exits" regardless of whether you sell first or buy first.

The "buy first" mentality causes a lot of pain for traders - since the market goes up and down every day, and you limit yourself to only buys, you're eliminating 50% of the opportunities.

Don
 
1) Some stocks will be hard to borrow for the broker so you can't short all the stocks at all the time.
You don't have that problem with futures.
The issue with futures (for newbies) is the discipline to manage the possibility of having too much leverage. Some can't deal with it, so the 5-7% of the new futures accounts survive after the first 2 years... (or less)
 
From what most people comment here, it appears shorting stock is not attractive at all:
* supply problem: not all stocks are available to be shorted
* uptick rule: can't short at market
* dividend cost: I need to pay if they give dividends.

Still some people short stocks. Why? Shorting index futures is a much better go - higher leverage; no restrictions; highly liquid.

As long as your strategy only works with stock, shorting stock is not a good idea.

Why?
 
when the vix spikes stocks with negative news can make massive moves down with a clear trend and short consecutive bars marking l/h l/l all day. those high vola periods are a dream come true for shortsellers and offer umbeatable r/r. intraday shorting stocks is a good way to make some cash but right now there aint no much moving and risk is still concentrated mainly on the upside, even on large gaps down. holding short overnite is pretty risky, especially on small caps and for now it is not exactly the best strategy around.

as for shorting futs is like buying them with the chart upside down as far as i concern.


it boils down to seasonality and for now shorting socks may not be such a good vehicle to make constant returns. futs are better but just intraday [again, just for now].
Quote from Trader_Herry:

From what most people comment here, it appears shorting stock is not attractive at all:
* supply problem: not all stocks are available to be shorted
* uptick rule: can't short at market
* dividend cost: I need to pay if they give dividends.

Still some people short stocks. Why? Shorting index futures is a much better go - higher leverage; no restrictions; highly liquid.

As long as your strategy only works with stock, shorting stock is not a good idea.

Why?
More...
 
NASD stocks are (or used) to be slightly different than listed, in that they didn't have to actually uptick but the bid would have to have a positive change (I think).
More...

What's the difference?

I heard some people call it uptick or zerotick rule.
So what is the difference between uptick and zerotick rule. It apears it means essentially the same to me. I can't short at market. I can only short at best ask. Please correct me if I'm wrong.
 
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