Shorting Stocks on the NZX

[Playa]

It is not something I have done before, but have been thinking about it in this Bear market. What platform do you use to do this? Which stocks would you be looking at shorting in the current environment?

[LaserEyeKiwi]

Shorting stocks carries much more risk and cost than being long, think long and hard before entering any short trades (your risk is unlimited).

[bottomfeeder]

Should be illegal. In the 1929 crash, short selling contributed greatly to the extent of the crash. Thank god not all companies allow it. On that note, margin calls and short selling calls, can really come at the wrong time, particularly in a volatile market such as we have now.

[allfromacell]

Bottom signal?

[Azz]

your risk is unlimited

That is complete nonsense. Your risk is not unlimited. "Unlimited" is a *concept* that does not exist in the real world. What type of lender would allow "unlimited" losses? What actually happens with a short gone bad is your broker will contact you requesting either an immediate cover to close out the position, or additional collateral to back it.

[Azz]

Should be illegal. In the 1929 crash, short selling contributed greatly to the extent of the crash. Thank god not all companies allow it. On that note, margin calls and short selling calls, can really come at the wrong time, particularly in a volatile market such as we have now.

Shorting is absolutely essential for functional equilibrium of a market. Making it illegal - which in reality would be making a form of borrowing illegal - would not only be wrong-headed but also mean a continuous chase to ban all sorts of financial instruments that achieve the same thing via other means.

[Baa_Baa]

Shorting is absolutely essential for functional equilibrium of a market. Making it illegal - which in reality would be making a form of borrowing illegal - would not only be wrong-headed but also mean a continuous chase to ban all sorts of financial instruments that achieve the same thing via other means.

Although I don't agree that it is 'essential', it is desirable as it affords greater participation in the market serving differing strategies and motivations, overall increasing market liquidity. The fact is true that borrowing stock to sell it (shorting) and buying back later (hopefully lower) is imo no different from borrowing capital to buy stock (leveraging) to sell later (hopefully higher). As are Put options, Call options, writing Calls, hedging etc etc.

The point though that I think the original question is coming from is that the NZX is an antiquated back-water bourse, and so are the incredibly unsophisticated trading platforms avail to the public, that offer very little opportunity to access and control any of the more advanced trading instruments or methods, other than limit buys and stop losses. Those that do have access are more likely to be very sophisticated investors with readily accessible access to multiple trading techniques and tools that are otherwise largely inaccessible to the lay investors/traders.

A quick story. Some time ago I focused solely on trading out-of-the-money long dated call options on profitable gold miners, when I had decided that the 24 year gold bear market was over and prices seemed certain to continue go up. Gold was between $US250-300/troy oz. That's buying 6, 12, 24 month 3-5 strikes out of the money call options, so cheap you'd laugh at the entry price for the reward if the POG continued upwards. Well one day (night) a long-date call option was 1200% up. I woke the missus and told her. She looked at me like kind of grumpy and I was some kind of loser and said, "did you sell?" Um, hang on a mo. Yup, now sold. They were fun times, very profitable, but staying awake all night and having a day job was not realistic.

The markets are a big place (understatement), there's so many instruments and trading methods available that it can be overwhelming, even if you can access them. As your perspective matures you tend to focus on only on what you know absolutely works most of the time. And then do that over and over again. There's so many mind-boggling Trillions of dollars invested in thousands and thousands of assets classes being traded in the world, it's incomprehensible and imo naive to suggest one or other method or techniques or instrument or tool should be excluded, usually because you don't understand it or don't have access to it.

Better just to refine refine refine until your focus is on a few repeatable methods that work for you most of the time. A wise fellow my grandad said once, the river of liquidity flows past you every day, and all you need to do is dip your cup into it to be successful.

[Azz]

Although I don't agree that it is 'essential', it is desirable as it affords greater participation in the market serving differing strategies and motivations, overall increasing market liquidity. The fact is true that borrowing stock to sell it (shorting) and buying back later (hopefully lower) is imo no different from borrowing capital to buy stock (leveraging) to sell later (hopefully higher). As are Put options, Call options, writing Calls, hedging etc etc.

The point though that I think the original question is coming from is that the NZX is an antiquated back-water bourse, and so are the incredibly unsophisticated trading platforms avail to the public, that offer very little opportunity to access and control any of the more advanced trading instruments or methods, other than limit buys and stop losses. Those that do have access are more likely to be very sophisticated investors with readily accessible access to multiple trading techniques and tools that are otherwise largely inaccessible to the lay investors/traders.

A quick story. Some time ago I focused solely on trading out-of-the-money long dated call options on profitable gold miners, when I had decided that the 24 year gold bear market was over and prices seemed certain to continue go up. Gold was between $US250-300/troy oz. That's buying 6, 12, 24 month 3-5 strikes out of the money call options, so cheap you'd laugh at the entry price for the reward if the POG continued upwards. Well one day (night) a long-date call option was 1200% up. I woke the missus and told her. She looked at me like kind of grumpy and I was some kind of loser and said, "did you sell?" Um, hang on a mo. Yup, now sold. They were fun times, very profitable, but staying awake all night and having a day job was not realistic.

The markets are a big place (understatement), there's so many instruments and trading methods available that it can be overwhelming, even if you can access them. As your perspective matures you tend to focus on only on what you know absolutely works most of the time. And then do that over and over again. There's so many mind-boggling Trillions of dollars invested in thousands and thousands of assets classes being traded in the world, it's incomprehensible and imo naive to suggest one or other method or techniques or instrument or tool should be excluded, usually because you don't understand it or don't have access to it.

Better just to refine refine refine until your focus is on a few repeatable methods that work for you most of the time. A wise fellow my grandad said once, the river of liquidity flows past you every day, and all you need to do is dip your cup into it to be successful.

Thanks for writing that, Baa_Baa, nice post.

[dubya]

Thanks for writing that, Baa_Baa, nice post.

Ditto Baa_Baa. I gotta spread my reputation around so I can't give you any;)

[LaserEyeKiwi]

Shorting does indeed carry unlimited risk, because there is no upside cap on an equity price. Whereas being long your downside is capped at 100% of equity price. Anyone who doesn’t know this and claims risk is not unlimited when shorting is an idiot.

Disastrous life altering events can easily occur when shorting because equities are repriced between trading sessions and offer no protection for shorts in the event of a big event between trading sessions that can cause a massive share price difference without any chance for the short holder to sell/cover at their preferred stop loss.

Your broker asking you for more equity does not mean anything good if you do not have the equity to contribute. That’s called bankruptcy. Usually followed by divorce.

[Azz]

Shorting does indeed carry unlimited risk, because there is no upside cap on an equity price. Whereas being long your downside is capped at 100% of equity price. Anyone who doesn’t know this and claims risk is not unlimited when shorting is an idiot.

Disastrous life altering events can easily occur when shorting because equities are repriced between trading sessions and offer no protection for shorts in the event of a big event between trading sessions that can cause a massive share price difference without any chance for the short holder to sell/cover at their preferred stop loss.

Your broker asking you for more equity does not mean anything good if you do not have the equity to contribute. That’s called bankruptcy. Usually followed by divorce.

You're a complete amateur. You have no idea what you're talking about.