Re:Analysts Wary of LinkedIn’s Stock Surge
by DarkShikari on Monday May 23, 2011 @12:32AM
(#2574969)
If you're long LinkedIn at $100, the most you can lose is $100. But if you short at $100, your loss can be infinite.
This is what put options are for.
That's true.
But IMO, to make it worthwhile, you still have to get the timing right. That's the hard part.
Identifying a bubble is relatively easy. What you don't know is how big it'll get and when it'll pop.
Definitely a ripe spot for put options... but there are no public put/call options available for LNKD yet, as far as I know. It's impossible to price an option without having some history of the underlying security's volatility--and we have zero history for LNKD.
The spread would have to be gigantic to lure market makers into such a trade--and, rightly so, investors aren't interested in gigantic spreads.
If you want to get bearish on this you'll have to strap on your helmet and just short it.
Re:Analysts Wary of LinkedIn’s Stock Surge
by supercanuck on Monday May 23, 2011 @12:31AM
(#2574968)
put another way ...
The market can stay irrational longer than you can stay solvent. - John Maynard Keynes
Re:Analysts Wary of LinkedIn’s Stock Surge
by ScottBurson on Monday May 23, 2011 @02:05AM
(#2575104)
It's true. I mused publicly about shorting it in a previous thread, but you're right, the timing with shorts is tricky. Also, shorting a company that seems likely to eventually catch up with its stock price, even if that takes longer than its current stockholders expect, leaves one with a relatively limited profit expectation. Long-term shorting is best done on stocks that have a visible shot at going to zero.
Just buy a put with a strike at $100. Accomplishes effectively the same thing as the short, but limits your downside.
Re:Analysts Wary of LinkedIn’s Stock Surge
by robertmrangel on Monday May 23, 2011 @02:14AM
(#2575121)
Another way to "short" is to buy put options. The most you can lose is the price of the option. Are there any puts for Linked In? I'd buy those... maybe.
If you buy LinkedIn at $100, the most you can lose is $100. But if you short at $100, your loss can be infinite.
As a short seller, you could run out of money before the promoter(s) runs out of ideas.
Being short a stock, while seeing some promoter taking the stock up would be quite agonizing.
You may be right about it being overpriced, but that's not enough. When it comes to shorting, it's the timing that you have to get right. And that's really hard.
It's okay to just sit this out.