Also, besides what you wrote you have the oddball situations like a crappy company getting an offer to get bought or some other one off event. It’s not for the faint of heart.[/quote]
Yes! One of my biggest losses was on Golden West (World Savings Bank). I had done a lot of research on them, even calling their loan officers on a number of occasions, giving them different scenarios to see what sorts of products they would offer, and then I’d ask questions about all the possible problems with those loans. They had one of the largest portfolios of negative amortization loans, and I knew multiple people who had absolutely no business getting any kind of mortgage who were able to get these risky mortgages through World Savings.
Anyway, they were my largest short position at the time, and then…Wachovia bought them at a premium at the very peak of the bubble (which is why Wachovia no longer exists). Needless to say, my largest short position which should have been 100% guaranteed to be one of my best bets, absolutely blew up in my face.
So, yes, you can be 100% right, but still have one of those one-off things happen that will destroy you when you are shorting. This happens all too often to shorts who were absolutely, 100% correct about the prospects for the given company.
