Now, I am not one to say nothing should ever be shorted, but at the same time you are looking at max 100% gains vs unlimited losses. I feel bad for these guys but a cautionary tale that risk management is important as you never know what can happen.
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Even selling puts can be painful if the market goes against you. It’s OK for young people like Tim Sykes but certainly foolish for older folks.
I never shorted. I no longer sell puts. Now I sell covered calls where the worst that can happen to you is that someone gives you money for your shares.
Denny Schlesinger
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Now, I am not one to say nothing should ever be shorted, but at the same time you are looking at max 100% gains vs unlimited losses. I feel bad for these guys but a cautionary tale that risk management is important as you never know what can happen.
Thanks Mike, Those should be required reading for anyone starting out investing. Wow!
Saul
As this was on a public board, and the poster obviously wanted others to learn from his experience, I’ll repost an excerpt of his post here. This is from the first of those two linked posts:
…It happend, with one quick overnight hold, I experienced feelings I’ve never felt before. I had a short position in KBIO with a decent risk reward that appeared to be OK into the closing bell. Just 9 minutes later, my 11k account I had built up over the past 8 months was swept away in a matter of minutes. With my body numb, my pale ridden face stricken with fear and my gut knotted into the biggest tangle you can imagine, I crawled up the stairs to somehow relay this to my loving wife. I couldn’t breath, the words would not come out of my mouth as hard as I tried. I had to motion her downstairs to the computer where the horrible 6 figure red numbers popped out like a soar thumb.
I am so lucky I have such a loving supportive wife. As she cradled me, assuring everything would be all right, it tore me apart. I contacted etrade to weigh my options, wanting to hold till morning for even the slightest pull back to somehow lesson the debt. After talking with etrade, asking to hold, I saw the orders coming in to cover my short position. They did not give me the chance to hold overnight and they liquidated my short position. as I write this morning, I see the pull back and what could have been tens of thousands less debt. With a final Margin call of $50,810, I am without words.
Nothing could have prepared me for this, I now know what it feels like to blow up an account and I cannot get it out of my head. I want to wake up from this nightmare with lessons learned, but reality has set in and I’m trying to be strong and handle it.
I am still waiting for etrade to call back with options, as we do not have funds to cover this tragic loss. And that’s just how I feel, like I lost a love one and can’t figure out reality inside my head…
This has to be the hardest experience I have ever felt and only hope I’ll have the strength to push on.
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Mother of all short squeezes going on, that Turing Pharma guy, he who shall not be named has cornered the market for the shares… He is going to make a killing squeezing the shorts, I threw it in CAPS to watch the drama, but really this IS an object lesson about the dangers of shorting.
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