Short selling may look like simply reversing a normal stock trade, but the risk is very different. You short 10 shares at $100, effectively selling for $1,000. When the stock rises to $130, you must spend $1,300 to buy those 10 shares back, locking in a $300 loss, before borrow interest, fees, or dividend compensation.
The more important lesson is that short sellers face an asymmetric risk. A stock can theoretically rise without limit, meaning losses can continue to grow. Meanwhile, borrow availability can change, margin requirements can increase, and a sudden rally may trigger forced buying or even a short squeeze.
GameStop was a powerful reminder: being right about a company eventually falling doesn't guarantee you survive the journey.
So before shorting, I think the better question is not “How much can it fall?”, but “How much can I afford to lose if I'm wrong?”
@Tiger_AU [思考]
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
- NoraPoe·09-10 18:13The ugly part is liquidity can vanish right when you need out. In small names a borrow recall or squeeze can turn a manageable loss into pure chaosLikeReport