SEC Chair, Mary Schapiro, announced that she has made it a priority to evaluate regulations on short selling.

This would be a big development and provide another leg up for some of the companies who are very beat up.  For the stocks that are the favorites of the shorts, there will likely be a more stable market.

No change will be perfect and there will certainly be unintended consequences, but this issue does need to be addressed.

via Biggest Shorts on the S&P 500 – CNBC By The Numbers – CNBC.com.

I am on vacation and will be out all day, but I get a sense that Citi could be a good short and long trade today. A short at the current level of $3.42 followed by a cover and follow up buy around $3.31, with a later sale of that position around $3.38, could probably be had. I wouldn’t make this trade if I wasn’t available to bail if things went bad, but I have a sense that we will see these numbers.

Good luck to anyone who gives this a shot. Today’s activity could very well be a good amount of short covering leading up to earnings.

I’ve started reading and I think I am leaning against short selling stocks. I think I’m going to look for ways to make money on stocks going up. Try to latch onto stocks on the up and grab profits where I can. 

Honestly, I don’t betting stocks will go down is not comfortable for me. Maybe I’ll learn the benefits of it but I have been following C for a couple of months now and have done pretty well. Bob and I have been talking lately and it seems like the short sellers have it in for C. Citigroup has not been participating in rallies lately and their stock is stuck. I know it happens but it doesn’t make a whole lot of sense when other bank stocks are going up (the sector is up for the day) and C is stuck and often down. There are benefits to shorting stock, I’m sure. I cannot say I’m for sure about what they are so it’s hard to get excited about shorting when, one, your personality is not really suited for it, and two, you don’t fully understand it. It sounds to me like a recipe for losing money.

This is a basic example of how a short sale of a stock works.

You sell a stock short and get the cash.  Sell Short 1000 shares @ $1 / share= $1000 in your account.

You need to go get those shares back to “cover” your trade.  You borrowed them from your broker and need to give them back. Your bet is that you will be able to buy them back lower.  The stock drops to $.90 / share and you buy the 1000 shares back to ‘cover’ your position.  Your cost is $900.  You get to keep the $100 (of the $1000) that you took in.

Make sense?