Sell Short

Come over to the short side. Ever since Dutch trader Isaac Le Maire invented short selling in 1609 (and evoked the first ban on it), short selling has been seen as the dark side of stock trading—slightly suspect and too intricate for individual investors. Today, short selling is an integral part of all markets and new tools can make it as simple as buying stocks. As Michael Shulman explains in this book, a short seller is a profit-seeking contrarian who sees opportunities others do not as a stock or market segment moves down. In Sell Short, Shulman turns the mystery of short selling inside out, revealing how using the same fundamental approach underlying the purchase of a stock can lead to tremendous opportunities on the short side. Shulman does not believe traditional short selling is a good trading approach for individuals and this simple, but comprehensive overview of short selling focuses on buying puts or, in some situations, exchange-traded funds (ETFs). Throughout these pages, Shulman reveals the day-to-day details needed to generate short side profits. He describes how short selling works and how individual investors can best identify compelling opportunities before Wall Street finds them. Shulman also helps you to determine what part of your portfolio will fund short selling, what percentage of your capital should go to the short side, and how big each position should be. Filled with in-depth insights and straightforward advice, Sell Short walks you through the mechanics of opening, managing, and closing a position, including rolling or pressing a position to increase profits. (Shulman does cover traditional shorting, though, in case you'd like to take that route.) Step by step, this book prepares you to: Prospect for gold in fading stocks See opportunities that Wall Street misses Create, manage, and exit a position Short stocks, markets, and indices as well as specific sub-segments of the market, real estate (through REITs), commodities, and even countries Create the "rocket-fueled trade"—the higher-risk purchase of calls on double inverse ETFs Explore a dvanced trading techniques such as selling calls, hedging, bear call spreads, selling puts on short ETFs, and more

Introduction 1 Chapter 1 The Schadenfreude Component of Your Portfolio 5 Chapter 2 How Shorting Works 15 Chapter 3 The Case for Puts 23 Chapter 4 Prospecting for Gold in Fading Stocks 33 Chapter 5 Technical Indicators—You Gotta Love This Chart 49 Chapter 6 Creating a Position 63 Chapter 7 Going Short the Traditional Way or Borrower Beware 81 Chapter 8 Shorting a Market Segment 91 Chapter 9 Creating the Great Segment Trade 107 Chapter 10 Shorting the Indices—Only the Big Ones. Please. 117 Chapter 11 Managing a Position or Everyone Has a Plan Until They Get Punched in the Face 131 Chapter 12 Shorting Commodities and Real Estate 151 Chapter 13 Shorting a Country 169 Chapter 14 Shorting in a Bull Market 179 Chapter 15 Advanced Trading Techniques 185 Chapter 16 Case Studies—Ruby Tuesday, the Bear, and the Home Builders 195 Glossary 205 About the Author 213 Index 215