How to Be a Chicken Short

I have learned over the years that it generally pays to establish and hang on to a few short positions during most trading periods. I have pointed out before that I do not outright short shares unless its part of an arbitrage strategy. I prefer to find stocks that I think are vulnerable and then use either puts or put spreads to short them.

This helps me avoid getting chewed up and spit out by momentum stocks. I can keep setting up positions in stocks such as LuluLemon (LULU) or Netflix (NFLX) until they finally fall apart without putting a serious dent in my equity. This strategy usually works but sometimes a stock will totally fall apart -- like Netflix has done -- or go into a long protracted decline like Greenhill (GHL) did earlier this year....523 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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