# Short selling



## Billyb (8 April 2011)

Have been reading into this a bit lately.

Sounds like a good idea, an opportunity to make money in both bull and bear markets instead of just bull markets means there are more stocks to make money from.

However, I am interested in people's experiences in the Australian market, which I think is quite different to the US market.

I've noticed Commsec only seems to allow short selling for intraday trading. Not interested in such short term trading. I'm more interested in shorting a falling stock over a longer term, if that's possible.

Comments?


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## NeuromanceR (8 April 2011)

Billyb said:


> Sounds like a good idea, an opportunity to make money in both bull and bear markets instead of just bull markets means there are more stocks to make money from.




It also gives you another way of... losing money.


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## Billyb (8 April 2011)

NeuromanceR said:


> It also gives you another way of... losing money.




True. Like any investment strategy, it's important to fully understand the potential risks before taking it on.


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## nunthewiser (8 April 2011)

Billyb said:


> True. Like any investment strategy, it's important to fully understand the potential risks before taking it on.




well done.

i use http://mfglobal-px.rtrk.com.au/
and http://www.cityindex.com.au/

I pay too much compared to others here that claim to use better brokers ( IB ) apparently, but i drift  along and havent had a problem yet........ even when it comes to pulling cash out


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## nunthewiser (8 April 2011)

ignore commsec short selling facility

its a recipe for disaster 

the position is closed at there discretion instead of yours

but hey....some people like that sort of thing


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## Billyb (10 April 2011)

nunthewiser said:


> ignore commsec short selling facility
> 
> its a recipe for disaster
> 
> ...




Thanks. Will look into those resources you've provided.


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## cutz (10 April 2011)

Billyb said:


> However, I am interested in people's experiences in the Australian market, which I think is quite different to the US market.




Depends what you want to short,

Stocks with good options turnover can be shorted quite easily using synthetic equivalents if you don't want to go down the CFD path.


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## ROE (10 April 2011)

Billyb said:


> Have been reading into this a bit lately.
> I've noticed Commsec only seems to allow short selling for intraday trading. Not interested in such short term trading. I'm more interested in shorting a falling stock over a longer term, if that's possible.
> Comments?





There are other ways to skin a cat  if you are with comsec, the best way to short a stock is with options but this only limited to the biggest of the big on the ASX
around top 20-50 stocks.

Sell a Call and Buy a Put with exact same expiration date and Strike price ...
if the stock drop, the Call will be Worthless and the Put will be in the money and you come out ahead if it dropped more than all your combined fees.

Say a $50 stock dropped to $30, you have would have made handsome amount
if you sell a $50 Call and Buy a $50 put

and I think that is what Cutz is talking about


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## pavilion103 (23 May 2011)

I am completely open to opinions and do not have a fixed on in regard to this below:

If someone is only going long in the market is that limiting themselves? I remember reading that a great trader will trade both ways (or is this BS?). 

Is the only way to go short by trading CFDs?

I want to use Interactive Brokers, so I am assuming I'd need to create a secondary account to go short?

Sorry I am new so fairly basic questions.


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## skc (23 May 2011)

pavilion103 said:


> I am completely open to opinions and do not have a fixed on in regard to this below:
> 
> If someone is only going long in the market is that limiting themselves? I remember reading that a great trader will trade both ways (or is this BS?).
> 
> ...




You can go short the conventional way... but you need to find the right broker. I was told that you can even do it with Commsec but see disclaimers above. IB now has a small selection of the companies that you can go short with - check the IB thread for more information.

As to whether a great trader will trade both ways... yes it is limiting if you don't have a short strategy. Having a shrot strategy increases your trade opportunities - and all else being equal, more opportunities = higher return. There is a saying that all good traders eventually move towards trading futures - and the ability to go long or short just as easily is a major reason. But there is no reason why you can't be a great trader who trades long only.


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## Wysiwyg (23 May 2011)

Shortable ASX stocks with CFD = 182. Shortable ASX stocks by IB = 161.

Some traders short the indices and long trade stocks.

If you're going to use the services of Interactive Brokers then knowing the service will be greatly beneficial.


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## IFocus (23 May 2011)

pavilion103 said:


> I am completely open to opinions and do not have a fixed on in regard to this below:
> 
> If someone is only going long in the market is that limiting themselves? I remember reading that a great trader will trade both ways (or is this BS?).
> 
> ...





Not so much great traders but yes ideally you look to go short in a bear market remember prices fall faster that they go up so you can make fast profits but beware that a falling market behaves differently to a rising market.

I use IB and its the same account you just enter a sell order instead of a buy order. 

The advantage of IB is you can put in the complete order i.e sell at x price with a limit that you are prepared to chase then put in (a bracket order)the profit target buy at X price and your stop loss buy price then you no longer have to watch the market second by second.

Better still once you have opened your account with IB they let you open a practice account so you can practice all the order types to see how they all work and test any system you want with out losing real money I still use mine to test various ideas.

 IB have lately expanded their stocks available for short selling on the ASX to around 161.

Link here for the current IB list http://www.interactivebrokers.com/e...try=australia&tag=Australia&ib_entity=llc&ln=

Hope this helps


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## skc (23 May 2011)

Wysiwyg said:


> Shortable ASX stocks with CFD = 182. Shortable ASX stocks by IB = 161.
> 
> Some traders short the indices and long trade stocks.
> 
> If you're going to use the services of Interactive Brokers then knowing the service will be greatly beneficial.




Wow that list for IB really expanded since their first launch.


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## IFocus (23 May 2011)

pavilion complete hypothetical shown below of the chart AWE and what the order would look like on IB for a short position of 10,000.
Note the sell order has a limit on how far to chase price Stop Limit entry

Also this has the bracket order for the stop-loss and the profit target set as well

IB is a thing of great beauty compared to Australian broker offerings

Hope this helps

.


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## IFocus (23 May 2011)

skc said:


> Wow that list for IB really expanded since their first launch.




Cannot remember what they had on entry to the Australian market they did have a few but then for what ever reason ditched the ASX short selling.

At the time it didn't bother me as there are 14,000 stocks to short in the US but nice that they now have a fairly good selection


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## Superboot (31 May 2011)

Hi all,

I have been trading a lot of small cap stocks on the long side, however am I right in thinking that to trade similar stocks on the short side is not available via CFDs or directly through a broker such as IB?

Cheers


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## IFocus (31 May 2011)

Superboot said:


> Hi all,
> 
> I have been trading a lot of small cap stocks on the long side, however am I right in thinking that to trade similar stocks on the short side is not available via CFDs or directly through a broker such as IB?
> 
> Cheers




The broker has to be able to rent / borrow shares of a stock to offer to you to short sell. This normally comes from major players who wont be selling stock and use short selling as a way of generating a small income.

These major stock holders wont be holding large amounts of small caps that I take it you are talking about so hence lack of available shares to short sell.

Short answer is not likely


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## Caveman (8 June 2011)

How long can you hold the position with IB?


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## IFocus (9 June 2011)

Caveman said:


> How long can you hold the position with IB?




Same as any broker as long as you want.


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## cudderbean (10 June 2011)

I use First Prudential DMA CFDs (Direct Market Access)..important if you want to avoid market makers manipulating the price.

They have a list of 250 shortable stocks.

http://www.fpmarkets.com.au/

I pay .08% brokerage.

They also do OCO orders... One Cancels Other as outlined by another forum member above.. set a  Stop Loss and simultaneously set a Target Profit. Whichever one is hit first cancels the other order.

As pointed out above, prices move very quickly if a support level is broken.. and they can bounce back quickly once they hit the next support, so take care.

Good profits to be made though in a bear market.

One thing I love about CFDs is that you can cancel or amend an order in nanoseconds...important in a fast moving market.

Good luck mate.


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## Nero64 (11 June 2011)

IFocus said:


> pavilion complete hypothetical shown below of the chart AWE and what the order would look like on IB for a short position of 10,000.
> Note the sell order has a limit on how far to chase price Stop Limit entry
> 
> Also this has the bracket order for the stop-loss and the profit target set as well
> ...




Hi IFocus, 

When I try and sell an ASX listed stock in IB I get an error saying my account doesn't allow it. However I can short SNFE CFD types. 

CFD looks like it is $6 so what's the main difference here. 

Also can I short the ASX 200 like a CFD broker because I can't see it. 

Regards,

N64


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## IFocus (12 June 2011)

Nero64 said:


> Hi IFocus,
> 
> When I try and sell an ASX listed stock in IB I get an error saying my account doesn't allow it. However I can short SNFE CFD types.
> 
> ...




Doesn't sound right!

Do you have a margin account with > $25K in it?

The quickest way to resolve what the issue is under Account Management go to the message center create a ticket and send off a question the IB staff are very good response wise they should clear up what the issue is.


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## IFocus (12 June 2011)

N64 read this http://ibkb.interactivebrokers.com/node/232 might help I think you need a margin account


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## mr. jeff (13 August 2011)

Did anyone here make a move on shorts and if so on what ? (in the past 2 weeks) What was your trade timeframe and entry conditions ?

Through all this market turmoil I have been looking over potential shorts and have found that the volatility made it quite risky. This probably means that my shorting skills need work; 

interested in what markets were good for shorts and what will continue to present opportunity if the money markets don't find a magic solution. 

Is it financials  -banks/insurers, resources, retailers, construction and building, airlines ? ? 
Is it our dollar and oil that will suffer first and worst if there is more turmoil ahead ? Want to build a shorting watchlist to move on quickly when the time comes.




see QBE above, has not managed to maintain its margin and competition remains strong. IS there further to go?




Caltex who has refiner margin troubles when times are good and refiner margin pressure when times are tough possibly another candidate ? But as they are both favourites among the superfunds, perhaps they will stay relatively resilient in retreats.

Leightons looks like a downtrend that will be hard to break at this stage, Worleys may find further trouble ahead too.
How much worse can the retail sector get ? May leave resources, Aluminium? Copper, Tin, Mineral sands? 
Iluka has had a sterling run up until a few weeks ago...




perhaps ripe for the picking - a lot of profit that people won't want to lose ?


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## tech/a (13 August 2011)

I find shorting Indexes the quickest easiest and best.
FTSE in particular.
DAX is  very fast.*No More 4s* will tell you the HSI is faster! 
SPI if your on the right side over night.
Best way I have found is to take a position as Europe indicates the direction.(overnight SPI).


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## Wysiwyg (4 December 2018)

tech/a said:


> Why isn't there any mention of Trading short.
> Its available and profitable.
> It doesn't have to be short term and the returns can be spectacular.



Just a word of caution when holding short positions longer term. You have to pay dividends and borrowing interest costs. IG slapped me with over $600 for dividends while holding a short position once and I will never forget that.


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## tech/a (4 December 2018)

Good point 
Thanks Wysiwyg


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## Knobby22 (16 April 2019)

Half tempted to get CFTs.
I would short SPT Split Pay, NEA Nearmaps and Z1P Zip.


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## cynic (16 April 2019)

Wysiwyg said:


> Just a word of caution when holding short positions longer term. You have to pay dividends and borrowing interest costs. IG slapped me with over $600 for dividends while holding a short position once and I will never forget that.



Those pesky considerations can sometimes be avoided/reduced, by shorting the equivalent forward futures contracts and, if necessary, rolling into the subsequent contract, upon expiry.

However, differences between contracts, in respect to fair value (which typically encapsulate cost of carry considerations) will still need to be considered when choosing these products over their cash/spot equivalents.


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## bigdog (21 August 2019)

Found this site today
https://www.shortman.com.au/

This site provides data on stocks that are being shorted on the ASX. This data is sourced from ASIC, and is the aggregate short positions for each stock. The higher the percentage, the more of that stock is shorted. It is important to note that ASIC releases this information with a delay of 4 trading days (T+4), and the data on this site is updated accordingly. This site should not be considered investment advice, nor is the information guaranteed to be accurate. Please read our notes on data and our disclaimer.

On this site we have a list of the top 100 shorted stocks, some information on which stocks are having the greatest changes in activity on their short positions, and some interesting graphs on stock shorting covering the wider market and some key sectors. Also you can search for a particular stock using its stock code from the search box in the upper right corner of this page.

*Sample of data reported below:*




964


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## bigdog (22 October 2019)

Short selling is human psychology in action and a bastardisation of capital markets.

Which is precisely what short sellers are playing on, when they publish these sorts of salacious reports.

And remember, this is so screwed up that the report itself is the catalyst for their own thesis. The most cynical of all self-fulfilling prophecies.

Is this really how share markets should work?

“Ah”, but the short-sellers’ supporters will say, “... if the short seller is wrong, the share price should go back to previous levels”





Second trading halt today at 11:06:38 AM 




https://stockhead.com.au/news/no-su...-wants-regulators-to-look-into-short-sellers/

*WiseTech’s CEO wants regulators to look at short sellers as JCap strikes again*
News

17 hours ago | Nick Sundich

*WiseTech (ASX:WTC)* CEO Richard White wants the government to address short-seller attacks after JCap attacked his company last week.

J Capital released a report on Thursday accusing the company of manipulative accounting practices and the stock fell more than 10 per cent before being put into a trading halt until Monday.

It resumed trading today but JCap released the promised second part of its report and the company fell another 12 per cent before being halted again until Wednesday.

WiseTech is still substantially higher than when it listed in 2016 at $3.35. But the two reports have wiped more than $2.3 billion from its market cap.

*Company pledges to correct the reports*
The company formally responded on Friday evening. In a statement, CEO Richard White refuted the allegations and called on the government to address short-sellers.

“We acknowledge the right to differing opinions but we are deeply concerned about the extensive value destruction that can be wrought from short-seller reports that potentially damage our shareholders large and small and the integrity of investment markets,” he said.

“All shareholders should be aware that unconscionable attempts to manipulate the market exist and may continue. We thank our shareholders for their support and patience while we correct these erroneous reports.

“We would ask the relevant regulators and government, not just for ourselves but for the many listed Australian corporations regularly subjected to similar attacks to consider the complex issues raised and the damage caused by reports of this type issued by a US or overseas short seller.

“In this instance, the JCAP document is clearly marked not for use by Australian Residents and notes that it ‘does not constitute or contain and financial product advice’.

“However, the dissemination if its document and its contents in deliberate, wide and rapid distribution through many Australian conventional and social media outlets, investor advice portals and investor platforms, has the real and immediate impact of disrupting the orderly and efficient operation of the market.

“These types of actions have the potential to damage shareholders large and small, including many ordinary Australians and their retirement plans and hurting and distracting many high-quality Australian listed and owned companies in ways that are impossible to entirely circumvent in advance.”

*“No such standard applies to these types of actors”*
White noted that despite the damage short-sellers could do, no standards applied to them.

“Whilst we, and other Australian listed corporations, are subject to stringent external audit, validation and verification, no such standard applies to these types of actors.

“Many of these attacks may be largely beyond the reach of our market regulators and operate in ways that are clearly at odds with our system of laws, our market, culture and society.

“We support investigations by regulators of attempts by short sellers to target ASX companies and in prosecuting unconscionable conduct.”

The company also used the announcement to refute the allegations made in the report. It accused JCap of erroneously misunderstanding, selectively presenting or misrepresenting its performance, product quality and customer satisfaction.

“We are a high growth company and profits have increased significantly since IPO along with revenue,” it declared.

The company noted JCap would profit from its fall and did not bother to inquire into them.

*JCap calls ‘bollocks’*
J Capital released the promised second part of its report this morning.

It began by responding to WiseTech’s rebuttal labelling it,” a well-worn playbook by cherry picking immaterial points to refute, remaining silent on major points and taking a high moral tone about short sellers”.

The rest of the report was dedicated to attacking its acquisitions. It said these had been ad-hoc made, over-paid and poorly managed.

While Richard White said these had been processing well JCap said,”This is to be blunt, bollocks”.

“Our interviews suggest that it is harming the companies it acquires by under-investing and jacking up prices on legacy platforms to force clients to move over to WTC’s Cargo Wise”.

“Because the acquired companies don’t produce the desired results, WiseTech has accelerated acquisitions to keep the growth narrative going”.

“We believe that when WiseTech slows or stops acquisitions, shareholders will realise they own a motley global collection of small, poorly integrated companies with dispirited staff”.

While it acknowledged the global shipping logistics market was $2 billion and WiseTech was the 2nd largest, it predicted it would hurt more than its competitors in a market downturn.

343


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