How do I short sell?

Today, let's talk about some of my insights on how to short sell.

In fact, I have always believed that for trend followers like me, short selling and going long are essentially the same. It's about following the direction of the candlestick chart trend.

Just like going long, I have two methods for short selling: stocks and options. Some experts also use futures, but I don't and have never tried.

Short selling stocks is relatively simple, you can just short sell directly. Compared to options, it doesn't have time decay, but the leverage ratio is relatively smaller and there is also the risk of margin call. Currently, in my portfolio, the short position of the goose feather stock, Yandex, has once frozen the withdrawal function of my account, which is very embarrassing.

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In addition, there are options, which are also divided into long and short positions. Short positions and short-selling of underlying stocks have the same risk of margin, but with the disappearance of time value, time becomes a friend of short positions.

What I mainly want to talk about is long positions in options, which means buying put options directly. The characteristic of doing so is that there is no risk of margin, the leverage ratio is relatively high, and time value is key.

The timing of holding is a key factor for the success of long positions in options.

At the beginning of 2019, not long after PDD went public, I saw that the candlestick patterns at that time happened to meet my judgment of entering a long position pattern. So I bought in January, I remember it was around 27 yuan. I bought both the underlying stock and options. Because I believed in its long-term prospects, I bought call options that expired after 6 months. After more than a month of buying, the stock price did indeed continue to rise, quickly reaching 31 yuan. When I buy, I usually set a target of doubling, so I didn't pay attention. Unexpectedly, starting from March, PDD began a 3-4 month correction. At that time, my holdings in US stocks were not many, and I didn't pay immediate attention. As a result, PDD fell to its lowest point of 18 yuan near the expiration date of my bullish options. Almost all of these options were wiped out. The stock price began to rise in June-July and broke through all the way. Finally, after the flood of the epidemic, it rose to 212 yuan. As for my bullish options, they sacrificed themselves long before the arrival of the PLA. Fortunately, the underlying stock was still there, but it didn't wait for 212 yuan. I closed my position in the range of 80-90 yuan, which compensated for the loss of the options.

So even if you pinpoint the target and get the direction right, options may not necessarily help you make money. Both long and short options have the same problem.

Now looking back at the timing of my purchase, at that time I also had two of my three swords of the bull and bear out, but as PDD was a recent IPO, I didn't have data for the third sword! After that, I set a principle for myself not to participate in the trading of any new or recent IPO stocks.

For this short selling, I basically used the method of directly buying put options.

At the end of last year and the beginning of this year when I started short selling, the market had not completely entered a bearish trend. The chosen targets were mainly the stocks of Muxinjie. $ARK Innovation ETF (ARKK.US)$At that time, I had already entered the bear market. In order to ensure safety during the period, my first short-selling symbol SQ chose a symbol that expires in September this year, just to avoid the lesson of PDD in the same year. Since March, the overall situation has gradually become clear, and I have become more courageous, shortening the expiration date of the symbol to 6 months. And I divided the same symbol into options expiring in 3 months and 6 months, and rolled over the positions with the passage of time.

Now looking back, this round was well-timed. If I had chosen short-term symbols at that time, even for one or two months, the returns would definitely have been much higher. However, I have no regrets because at least I bought some peace of mind at that time. And even for such long-term options, the returns have far exceeded my expectations.

After thinking it over, I decided to show off a bit and share the ROI of one of my accounts from short selling since last year to now. I know that every time I show off, I will definitely jinx it, and there may be an immediate pullback. Maybe someone will accuse me of faking screenshots or something like that, but I don't care, it's enough to show off.