-Shorting requires a cash margin so that your trade is not called by the broker
-If the stock goes up, your margin must increase
-There is no check on an overvalued stock. You just have to wait. Only negative earnings or a change in investor sentiment will bring the stock down. Meanwhile, a company that is undervalued can sell itself, spin off a portion of the company, repurchase shares, or issue dividends to keep its price in line.
You can definitely make money shorting an expensive stock. But it is more risky than going long a cheap one in my opinion.
No comments:
Post a Comment