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The Short Case for Shorting Somthing…

August 8, 2008

There has always been a stigma attached to shorting stocks with the average investor, as if betting a company will fail rather than succeed isn’t the American way. Maybe it was because of how short sellers got vilified in the media, or because the cost of shorting was just too much or too risky, as a lot of people don’t want to deal with a margin account or options. However, these days there are so many cheap ways to get short exposure through ETF’s that it would be a shame to not consider shorting something. Whether you just want to protect some downside movement on your overall portfolio with index short ETF’s, or believe the bubble is popping in energy and want to take advantage of some of that downside movement with a commodity short ETF. Better yet, if you feel like oil prices have peaked and oil services companies have a lot of downside, you could pick up some DUG which looks like it’s breaking out of a nice round bottom with a lot of room for upside.

Think about it like this – there’s always a down-trend or a bear market in something – right now it’s commodities, the first half of the year it was…well pretty much anything except commodities – if you only play one side of the market you are missing out on a lot of potential gains. We are in a bear market, and there are plenty of opportunities to benefit in this environment. If you believe the bottom is in and it’s straight up from here and the worst is behind us, well I guess this doesn’t apply to you – but if you think there is more downside risk and want to sleep soundly at night, then why not short something?

Here is a list of some liquid ultra-short ETF’s for your consideration.

DXD UltraShort Dow30

SKF UltraShort Financials

DUG UltraShort Oil & Gas

QID Ultrashort QQQ (Nasdaq)

SDS UltraShort S&P500

TWM UltraShort Russell 2000

FXP UltraShort FTSE/Xinhua China 25

EEV UltraShort MSCI Emerging Markets

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Posted by HPTG Analyst | Filed Under HP Trading Blog 

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