MALLORCA, Spain, April 27, 2021 / PRNewswire / – Wall Street veteran and author of “The Millionaire Dropout” Vince Stanzione weighed on the wave of activity and short selling scandals that have rocked financial markets in recent months. With the financial media recently laser-focused on stories like Reddit’s independent retail traders and Gamestop’s squeeze campaign (GME), Stanzione has addressed what he believes is an unfair characterization describing short selling as financially irresponsible. and malicious.
“Short selling is the act of selling a stock that you don’t own, that you have to borrow in the market while waiting for the stock price to drop, before buying back the stock (hopefully at a lower price) and return the stock to the lender, âStanzione said.â For example, if I sell 100 shares short at $ 120 and this stock then goes down to $ 100, I can buy back the stock at a lower price than I paid for it and make a profit. In Europe, Contracts for Difference (CFDs) have been used for over 25 years by professional and retail traders to profit from a range of markets, including stocks, indices and commodities. Financial futures and traded options (put options) have been around for many decades. These allow you to profit or hedge against downward movements. The idea of ââmaking money with a falling price isn’t new. Retail clients, especially in the United States, tend to avoid short sales.
Being short has a limited advantage
Stanzione also noted that the maximum potential gain on short selling a stock is 1x, because the maximum a company can reach is zero – and this is an extremely rare event. Returns can be amplified with leverage or by using a traded option. On the other hand, a stock has no maximum upside potential and could easily go up 500%. In theory, there is no limit to the potential losses from a short position, so it is important to properly manage the risk and size of the position. Short squeezes, where rapid and significant upward price movements cause short sellers to hedge in large amounts, can push prices against short sellers.
âEven in a bull market, there are always opportunities to profit from falling individual stocks,â Stanzione said. âBut overall, the majority of my trading earnings come from long stocks. We have seen a very good period for stocks, with many speculative names and PSPC stocks moving based on a lot of hype and optimistic expectations – all of which are likely to disappoint, in line with the fundamentals. It should be remembered, however, that markets go up the stairs, but often take the elevator to descend.It is not uncommon to see large drops in a stock occur over short periods of time, especially when things start to get bad. turn. But I think the next 12-18 months will be a very lucrative time for short sellers. “
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On Vince Stanzione
A self-taught multimillionaire, Vince Stanzione has been trading the markets for over 35 years and is the author of New York Times bestselling “The Millionaire Dropout” as well as “Making Money from Financial Spread Trading”. It has been favorably featured and cited in over 200 newspapers, media and websites including CNBC, Yahoo Finance, MarketWatch, Reuters.com, Independent, Sunday Independent, Observer, Guardian, The Times, Sunday opening hours, Daily Express, What Investment, Growth Company Investor, the New York Times, Bullbearings, City Magazine, Canary Wharf, Institutional Investor China and Shares Magazine.
Vince currently lives on the island of Mallorca, Spain, and trades financial markets, including currencies, stocks, commodities and cryptocurrencies. Learn more about his work at: www.FinTrader.net.
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