News for hackers. Stuff that matters.

A comment on Secondary shops flooded with unicorn sellers. Parent comment

Re:Secondary shops flooded with unicorn sellers by clock_tower on Friday February 19, 2016 @08:39PM (#11138196)
Shorting is very risky, since the downside risk is unlimited if you guess wrong. (Imagine shorting Microsoft based on the low quality of their code, sometime around MS-DOS 1.0.) It's better to buy businesses that will go up when the market goes down, or ones that are recession-proof in general, while avoiding cyclically sensitive businesses and, especially, any sectors that are about to have bubbles burst in them.

If the near future is the unicorn version of the dot-com bubble, its aftermath would be a good time for tech stocks you're interested in.

[ Parent | on HN ]
Re:Secondary shops flooded with unicorn sellers by nostrademons on Friday February 19, 2016 @08:43PM (#11138217)
Options, then. Buy a put option and your downside is limited to the cost of the option; you just get nothing if it's out of the money.

My point is that there are plenty of financial instruments that exist precisely so you can "put your money where your mouth is".

[ Parent | on HN ]
Re:Secondary shops flooded with unicorn sellers by sk5t on Friday February 19, 2016 @10:57PM (#11138736)
Options vs. shorting are just two different ways to risk all your capital on a bet... the "unlimited" downside of a short position has a practical limit--it's when your broker forces your account to cover with buys (the short squeeze) and you zero out.
[ Parent | on HN ]
Re:Secondary shops flooded with unicorn sellers by eru on Saturday February 20, 2016 @12:24AM (#11139014)
You describe selling a call. Not buying a put. (jessaustin is right about these.)
[ Parent | on HN ]
Re:Secondary shops flooded with unicorn sellers by sk5t on Sunday February 21, 2016 @12:19AM (#11143415)
No, I described the practical downside exposure of a short (or, the trader could put in a stop). It is no more "unlimited" than is the downside of buying a bunch of ultimately worthless options.
[ Parent | on HN ]
Re:Secondary shops flooded with unicorn sellers by eru on Sunday February 21, 2016 @08:10AM (#11144352)
Unless your options trade on an exchange, and they have a clearing house behind them. (The government doesn't let the clearing house fail.)
[ Parent | on HN ]
Re:Secondary shops flooded with unicorn sellers by jessaustin on Saturday February 20, 2016 @12:04AM (#11138948)
Buying an option only risks the cost of the option.
[ Parent | on HN ]