/biz/ - Business & Finance

https://www.tastytrade.com/tt/shows/from-theory-to-practice/episodes/the-short-side-stocks-bonds-06-20-2016

Here's the mathematical rationale behind shorting.
Market price movement has Negative Skew and Positive Kurtosis.

Melt Ups happen way way less often than Melt Downs.

It generally takes everything going right for the price to drip higher. But it takes one thing to break down. Look at chipotle.

> Don't see the upside
of a boatload of cash made quickly.
of a position hedged against small to moderate loss.
Cost Basis Reduction
Non-Correlation

>>1435494
> OWNERSHIP
comes with costs of stewardship. Have you ever been through or seen a bankruptcy or liquidation. Take the recent Sports Authority thing. All those assets you have a claim to were sold at 50%-10% of present value and paid to Bond holders first. Equity is a massive risk and one of the riskiest positions you can have. Pure equity is almost always a guaranteed loss given enough time. Once your timeframes go beyond 100 years very few companies survived.
Its clear you haven't done the math on the risk.

Avg Market P/E is 12 currently it is 19. Regression to the mean is not a thing but if people are paying way too much today there is no sense in missing the opportunity to sell high.
buy low, Sell high & Sell High, buy low are the exact same position.

Or say you'd like to hedge say Frito-Lay, which you think is a fantastic company except for the fluctuation of corn prices. You'd buy frito-lay and sell corn. Now you own a position on that is insulated against random weather patterns and is just the marketing and distribution aspects of the business which you have come to love.

Buy the Dip, Sell the Rip.
>>1435376
No one here is advocating naked short selling of penny stocks.
We're saying its a tool, a great tool worth using. Any objections you have are personal. Maybe you couldn't pick a top with a gun to your kids head and "you" shouldn't short, same way some people can't see the dip.

Coke bear reporting in