TSLA closed February 2, 2016 at $182.78, a drop of $28.22 in just eighteen days. That’s a profit of 26% if your broker requires a 50% retail margin on a short sale, and better than double if you’re trading options, in this case put options. For a portfolio manager, the recommended standards are below.
We invite you to submit other candidates for the Fixed System Short List. Daily access to all recommendations and comments is available in the private client section. Let me know if you need the password.
The Fixed System Short List
The criteria for getting on the list are as follows:
- A prior price rise greater than 500%
- A large market capitalization that makes further price rises unlikely to exceed 33%
- Sufficient opportunity for underwriters and insiders to exercise stock options
- A flawed business model due to government intervention that makes it likely the free market share price will in time go to zero
The strategy for trading a short position is as follows.
Never pyramid or leverage a short. Do not overtrade. There should be no margin calls. If there are, you are overtrading. Short positions should be closed if you get a margin call. Getting a margin call is conclusive evidence that you’ve overtraded. Never make a margin call. You should close out your short position for a profit on any share when the share has lost ninety percent (90%) of its market price from its high. No one position should exceed five percent (5%) of the equity value of your portfolio at any time.
Current Short List
Date added to list: January 15, 2016
Price sold: 211 USD