I have to agree with Chris on this trade in LEND but for different reasons. I traded options and puts for years using technicals and did quite well at it but as the market got more and more saturated with institutional players, I started to lose my simplistic edge and just stopped trading altogether.
I just looked at LEND and my charts tell me that this stock is heavily oversold and possibly due for a rally soon (on a daily chart) but may continue it’s slide in the long run(on a weekly chart). When I was trading and two different time frames conflicted, I didn’t take the trade.
Secondly, regardless of your experience level, I would always recommend going short using puts as opposed to shorting (selling borrowed stock).
Puts limit your downside (loss) to the amount of your investment, increase your upside (gain) through the use of leverage and you never have to worry about getting caught in a short squeeze (which theoretically, could increase your loss infinitely).
“A stock can only fall to zero but can rise forever.”
Lastly, anyone trading the markets (long or short) should use proper risk management and especially when shorting, make sure you have stops in place and know your exit strategies (profitable or not) well in advance.
From an old trader’s perspective, shorting is a lot more scary than going long. Longs can only lose the value of their investment (if the stock goes to zero) but short sellers have unlimited exposure if the stock continues to rise against their position.
So, if you really believe a stock is going to tank within a reasonable time frame, why not use puts?
