I
consistently make money betting against the shorts (termed as short
squeeze). When they short too much, they are running out of stocks to
short. When the stock has been shorted more than 25% of the outstanding
shares, opportunities exist. For my limited actual trading, the average
return for this scenario is 24% (vs 13% for all stocks I traded in this
period). There are about 44 cases in about 2 years.
The current
stocks are the two chicken companies: PPC and SAFM. They have good fundamentals and the shorts are over
40%.
Only hedge funds short constantly (another term for hedge
for most folks). The hedge funds in general are not doing great as a
group (they cannot even perform better than SPY in the last 5 years).
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