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The events are 50 trading ideas proposed by Shortpicks.com between May 2004 and July 2004, sorted according to their gain/loss, in 5% intervals.

Meaning of this table

Data were NOT filtered by gainers/losers or open/closed status. Here are depicted ALL ideas, including those that are open, closed profitably or stopped out (we recommend using automatic stop orders to prevent large losses).

There are some interesting observations in this table:

• The highest frequencies are for stock picks losing 25%-45% off the average entry price suggested in our reports.

• There are 24 stocks (out of 50) whose current price are more than 30% lower than our proposed entry.

• Only 5 stocks are trading above our proposed entry range (a loss for short sellers), and those losses are below 10%.

• As of August 6, 2004, there is only ONE PICK trading more than 10% above our average suggested entry (and that particular pick was closed at a 34% gain, before its late run-up).

Current results have been favored by market conditions, and are above our highest expectations. Past performance is not an indication for future results. However, there is something suggesting that ShortPicks' system is effective, right?

Our stop losses

We have had several of those 50 ideas "stopped out" by hitting our initial stops (17 out of 50 picks). A vast majority of them are now trading below our proposed entry, thus confirming the validity of our idea.

However, in order to protect our subscribers, we never try to convince them about the "strenght" or "validity" of a particular pick. We just provide appropriate stops and encourage our subscribers to use their own.

ShortPicks' true performance is affected by stop losses and closed positions. We honestly disclose all our picks, including gainers and losers. While several picks have been stopped out, our typical stop loss (excluding unusual gaps) is about 3.99%. Winning positions are more frequent than stopped positions, and average gains are higher than average losses.

We don't hide our stop losses. We are proud of those stops, because a stop hit is not a trading failure, but a success in our commitment for capital preservation.

An advantage for options players?

Even after having several of those 50 ideas "stopped out" by hitting our initial stops, a vast majority of them are now trading below our proposed entry.  This past performance suggests a potential advantage for put buyers using the ShortPicks' system.

As you may already know, puts have several intrinsic advantages:

• Lower capital requirements, more leverage.

• Not sensitive to short squeezes and bull traps. Unlike shorts' sad losses on "stop-harvesting spikes", big profits can be made with a downtrend resumption after those bull traps.

• Limited loss during a bullish breakout.

• The ability to take profits higher than 100% as opposed to short selling, in which gains cannot be pushed above 100% (unless trading on full margin, not recommended).

• Longer-term put options do not cost a lot more than near-term puts, while call options are skewed differently.

• Volatility (from fear) tends to rise dramatically when prices fall, adding more fuel to put prices.

• Puts may be available even when brokers have no shares available for short selling, giving you an alternate way to go short.

• When a thinly traded stock gaps down suddenly, early in the morning you may catch options at "old" prices* (perhaps GTC orders that someone forgot to cancel).  Puts can make instant profits on the gap, usually a few minutes after markets open. 

* We recently played NABI puts that way, with paper gains ranging from 30% to 110% after few minutes.     

Please note:  We are not advanced options players and we don't provide concrete ideas for puts, except on occasional alerts.  Our ideas are optimized for safe and effective short selling, but options players can use them to maximize their finding of juicy put options in stocks poised for a major downtrend.

In June 2004, a particularly active month, 26 out of a total of 29 picks were optionable (see pie chart), and some of them had (or still have) attractive prices.

Don't miss other interesting pages in our website:

Full track record

A preview of our members area

Examples

Educational content:

Short selling 101

The 555 center

Controlling your risk

Myths and truth about short selling