If you are interested in a particular stock look out for any penny stock short sellers. Short sellers have to borrow stock from brokers to sell the stock as they do not already own it. They hope the price will fall significantly so that they can buy back the shares at a much lower price, make a profit and return the shares to the stock lender.

This is a very risky way of stock speculating and is usually only carried out by experienced investors. Such investors carry out a great deal of research and would be expected to have a good reason to be shorting the stock.

A short seller may short a stock because he expects the company to default on a loan, for example. It is important for you to try and determine why a stock is being shorted and to only invest in that stock is you fundamentally disagree with the reason.

Otherwise if you are aware that a particular penny stock is being shorted, stay well clear.

Dave J.

Bull or Bear? Share this:
  • Digg
  • del.icio.us
  • Facebook
  • Mixx
  • Google Bookmarks
  • Propeller
  • Reddit
  • StumbleUpon
  • Technorati
  • TwitThis

Tagged with: • • • • • •

Filed under: Blog Posts

Like this post? Subscribe to my RSS feed and get loads more!