thoughts on shorting, based on my personal albeit somewhat limited experience
Shorting is really difficult, the long term trend of major indices is up, so that is a natural headwind.
When shorting you have to time the top (sell) and bottom (buy), which I’ve found quite difficult. I’ve been short volatile etfs like small caps via long puts during bear markets, but how do you decide when markets have fallen enough? I don’t know. I suppose you can average in and then average out, but I don’t have a good answer. In contrast, when you are long stocks, and because the long term trend is up, if you just hold long enough, history shows you will make money. So all short positions have an (unknown) expiration date, whereas long positions (at least on a market index) do not expire.
I do not outright short. I have only shorted via long puts. I do not outright short because I do not trust the operations of any brokerage. When you are short stock you are exposed to, theoretically, unlimited losses and you must have a margin account. Suppose there is one bad price tick that spikes way up (think flash crash event, except flash up) on your short stock and your broker marks your account with this way high and bad price and makes a margin call on your account and liquidates a bunch of your positions to cover the margin call. Bad prices occur all of the time - just think how many prices are streaming every day across all securities - there will be bad price data. I get that this is very unlikely, but this is not a risk I want to put in the hands of any brokerage software. Even if the facts are on my side, I don’t want to go through the mess of sorting all of that out in the case of a pricing mess up. I bet that this is a rare event, and systems are most likely always improving, but I also bet that it has happened to people and was very unpleasant.
I was thinking recently about shorting and looking at puts on ARKK, but I haven’t gotten too serious, because in the long run I have lost money trying to short.
I would challenge anyone on this board, if they short (or go long puts), to post their positions as they take them and let’s see how it works out. In, I think, early 2021, maybe before I can’t recall, I was looking at Carvana and thinking this is a garbage business with terrible financials but it kept going up, and they did indeed crash, but it took awhile. So during the peak of this last bubble, when people were (correctly) calling a bubble, it can take time, like years, for these things to play out.