Buyer beware of a short seller article Short sellers are a term used to describe people who sell short on a company, or even a whole stock.
It can be a very risky business if the company is in the wrong hands.
If you’re short on your food, then it can be extremely dangerous for your business.
Here are a few things to consider before you put your money in a sale.
Can you tell when a short is on?
Short sellers can be very helpful if you have no idea if the stock is actually worth what it’s being sold for.
A short is one where a company says they’ve just sold a share for less than the original asking price, which can be difficult to verify, because there are no published records of the transaction.
Are you shorting?
If you buy a share of a company and have a short position, it can also mean you’ve been shorting the stock for a long time.
A person can hold shares of a stock for many years before a company makes a move in the stock market.
If the stock price is up, and you’re just shorting, you may be able to get back in the game with a short.
Are the shares being sold undervalued?
You may be looking at a share that has a higher price, or is being sold at a discount.
Short sellers often sell stocks at the lower end of the market.
Can I sell shares at an inflated price?
A lot of short sellers will take the risk that you’re going to get caught shorting on the stock and will make you a target of a price manipulation firm.
A company may put up an inflated stock price to make you look better than it actually is.
A quick check on the company’s website will reveal the stock being sold is worth less than what the company actually is worth.
The company is likely lying about the actual value of the shares, which is why a lot of people get caught.
If that stock price increases to over $1,000, then you’re not shorting it, but the company may be shorting you.
Is it safe to short?
If a stock is being shorted, you should always make sure you have a solid idea of what the actual price of the stock should be.
If it’s $100 per share, you’re more likely to short the stock than not.
You can check the share price at the time of sale, and make a determination whether it’s worth the money that you are paying for it.
This could be the difference between being able to buy the stock at its true value, or buying a share at a price you think will be inflated.
If your shares are being shortlisted at the high end of their price range, it’s likely a good bet they are being bought by people who have a strong appetite for them.
What if you get caught?
If the company you are shorting gets caught short, you can be put on the spot, and could be fined up to $200,000.
You could also face jail time if you were caught short selling the stock.
This is the same penalty you can get if you short a company that is undervalued, or if you’re found to have been short selling shares of an unlisted company.
Are there any other risks to shorting shares?
Shorting stock in a long run can be risky, as it can create a lot more debt for you in the long run, if the value of your shares declines.
It’s also a lot harder to do right if you lose money shorting a stock.
You should also avoid buying shares that have a lot in common with the company, like the same name.