6 Ways to Make Money in a Stock Market Crash

There are lots of ways to make money from a falling stock market, some speculative, and some not so risky. It’s great that these options are available, because small investors need a way to protect themselves, and even make money on the downside. Many traders and investors believe that the stock market has reached a peak. Here are several options to choose from.

1. Shorting Stocks

OK, let’s get this one over with first because it is one of the most speculative and risky ways of making money in a bear market. In simple terms, you make money when the stock goes down and you lose money when the stock goes up. What technically happens is that you borrow the shares and immediately sell them (this all is done electronically through your brokerage firm) and since you owe those shares, you eventually have to buy them back at some price, hopefully a lower price. The difference between your sale price and eventual purchase price is your profit.

Can you make a lot of money shorting stocks in a bear market? Yes. Is it speculative? Very. Can you lose a lot? Most definitely. This is why it is so risky. When you short a stock, the lowest point it can drop to is zero. Whereas, if the stock goes up, the amount it can increase is unlimited. Let’s say you short 100 shares of a stock at $20 a share. If you put up funds equal to 100% of the value of the shorted amount, and the stock drops to zero, you’ve made a 100% return. However, suppose the stock goes from 20 to 100, you end up losing 400% of your money with lots of margin calls along the way.

Have I shorted stocks? Yes. Have I made money from shorting? Yes. Have I lost a big chunk of my profits by closing out my short positions and going long, trying to predict the bottom? In the interest of full disclosure, yes. Several years ago, I made the second worse decision I could have made when shorting, and that is predicting the bottom of the market too soon. The worst decision would have been to hold on to my short positions after the market bottomed and started to make a quick rise. Often when the market bottoms at the end of a bear market, the rise is very sharp and fast, and can totally wipe out short position profits very quickly and then some.

Just before the big crash several years ago, shortly after I shorted a high priced stock selling for about $100 a share, the position went against me by 13 points. That’s a $1,300 loss for just one hundred shares in one day! I still had the short position after the market closed, and had the pleasure of trying to sleep at night, wondering if there was going to be a takeover the next morning or some other good news that would drive the price even higher, making my losses worse. Fortunately, the stock crashed along with the rest of the stock market and I ended up making a profit, but it was very stressful waiting for it to happen.

One way to hedge yourself is buy buying a call option on the stock you sorted, to protect yourself in the event the stock rises.

So in summery, do I think you should short stocks? Absolutely not. The risk is unbelievable. If you understand options real well, hedged short selling might be OK, as long as you are an experienced trader, and know what you’re doing.

2. Short (Bearish) ETFs

There is a type of Exchange Traded Fund called the Bearish ETF or Short ETF. What these ETFs do is provide a return opposite to the return of the index, sector, or industry that it is tracking.

For example, the Short Dow30 ProShares (DOG) provides a return that is the inverse of the Dow Jones Industrial Average. If the Dow goes down 2%, the DOG goes up 2%. The Short QQQ ProShares (PSQ) ETF gives a return that is the inverse of the NASDAQ 100 Index. If you are bearish on gold, you can buy the PowerShares DB Gold Short ETN (BGZ) ETF.

The nice thing about these short ETFs is that your losses are limited. Also, if you are long individual stocks that you don’t want to sell, these can be good for protecting your portfolio on the downside.

3. Leveraged Bearish ETFs

If you like volatility, you will love the leveraged bearish ETFs. What these ETFs do is provide double, and in some cases triple the inverse return of indices. One example is the UltraShort Telecommunications ProShares (TLL), the Rydex Inverse 2x S&P Select Sector Health (RHO), the UltraShort Consumer Services ProShares (SCC) and the Rydex Inverse 2x S&P Select Sector Tech (RTW).

In addition there are over a dozen triple leveraged bearish ETFs. Talk about price moves! The volatility of these things is unbelievable, and so are the wide bid and asked spreads that I’ve seen occasionally.

The advantage of these trading vehicles is that they are a way of shorting on margin, with a limit on the downside. The disadvantage is that the losses are quick and large, especially with the triple leverage short ETFs.

4. Bear Funds

It may be hard to believe, but there are actually a large number of bearish mutual funds for the long term bearish investors.

There are many bearish mutual funds, including the Grizzly Short Fund (GRZZX), the PIMCO StocksPlus TR Short Strategy Institutional Fund (PSTIX), and the ProFunds Bear Investors Fund (BRPIX). These funds have minimum investments ranging from $1,000 to $5,000,000.

I’m not sure why anyone would invest in these unless it is for some kind of a long term hedge.

5. Puts

A put is the option to put your stock to someone at a particular price within a certain period of time. In other words, if you own a stock that is trading at 22 and you buy a put at a dollar [puts and calls are priced on a per share basis, so a put at $1 would cost $100 for 100 shares] which gives you the right to put your stock to someone at $20 per share within three months, there are a couple of things that could happen. The stock could tank to $14 a share and you could put your stock at 20, or just resell the put for 6. You would be far better off than just doing nothing. And if the stock goes up or stays about the same, you are just out your $100 for the option. Puts can be useful for experienced traders.

6. Cash

There is one other way to make money in a bear market. Sell everything, and keep your money in cash, preferably a T-bill money market fund, that only owns T-bills. (Repos are supposed to be just as safe, but these days, I would look for the ones that just own the T-bills. I will cover repos in another article.) The advantages are that you can’t lose money and you can receive an income from the investment.

Hopefully, this post will provide you with some ideas to hedge your portfolio in the event the stock market does tank, and maybe even make money from the market drop.

Disclosure: Author didn't own any of the above at the time the article was written.

Top Short Squeeze Oil Stocks

Oil related stocks have dropped long and hard, and many short sellers have profited handsomely. However, at some point, the short sellers need to cover their position. The first sign of a rise in the price of oil could cause a short squeeze.

One trading technique is buying short squeeze stocks. Here is what a short squeeze stock is and what a short squeeze is.

When you short a stock, it means that you expect to make money from a drop in the price of a stock. Technically what happens is that you borrow shares of a stock, sell those shares, then buy back those shares at a hopefully lower price so that those shares can be returned. Of course, this all happens electronically, you don't actually see all the borrowing and returning of shares; it just shows up on your computer screen as a negative number of shares.

Short sellers can make a lot of money, but sometimes when the stock moves against them, the stock starts to move up, and the short sellers jump in at once to buy shares to cover their position. This is called a  short squeeze. When a short squeeze takes place, it can cause the stock to rise fast and hard. Any type of positive news can trigger the short squeeze.

So other traders take advantage of this situation buy looking for stocks to buy that may have a potential short squeeze. Here is what they look for:

• Short Percentage of Float ~ The float is the number of freely tradable shares and the short percentage is the number of shares held short divided by the float. Amounts over 10% to 20% are considered high, and potential short squeeze plays. 
• Short Ratio / Days to Cover / Short Interest Ratio -This is probably the most important metric when looking for short squeeze trades, no matter what you call it. This is the number of days it would take the short sellers to cover their position based on the average daily volume of shares traded. This is a significant ratio as it shows how "stuck" the short sellers are when they want to buy in their shares without driving up the price too much. Unfortunately for the shortsellers, the longer the number of days to cover, the bigger and longer the squeeze.
• Short Percentage Increase ~ This is the percentage increase in in the number of short sellers from the previous month.

Here are some stocks that are heavily shorted that may warrant a closer look. Remember that some stocks are heavily shorted for a reason.

Stock	Symbol	Short Interest	Days To Cover
Rex Energy Corporation	REXX	43%	7.7
CARBO Ceramics Inc.	CRR	43%	9.7
EP Energy Corp	EPE	42%	7.1
Basic Energy Services, Inc	BAS	41%	7.9
Chesapeake Energy Corp.	CHK	37%	8.6
Transocean Ltd	RIG	35%	9.1

Beware of the risks. For other stock ideas, check out many of the free stock lists at WallStreetNewsNetwork.com.

Disclosure: Author did not own any of the above at the time the article was written.

By Stockerblog.com

Huge Profits With Short Squeeze Stocks

By now, most readers have heard about Keurig Green Mountain, Inc. (GMCR), which jumped about 75% in one day, due to a takeover, and that hedge fund manager, David Einhorn had a short position in the stock. But even a rumor of a takeover can send a stock higher, causing short sellers to scramble to cover their positions, creating what is called a short squeeze.

A technique that stock traders often use is buying short squeeze stocks. Let's go at a more extensive explanation of what a short squeeze stock is and what a short squeeze is.

When you short a stock, it means that you expect to make money from a drop in the price of a stock. Technically what happens is that you borrow shares of a stock, sell those shares, then buy back those shares at a hopefully lower price so that those shares can be returned. Of course, this all happens electronically, you don't actually see all the borrowing and returning of shares; it just shows up on your computer screen as a negative number of shares.

Short sellers can make a lot of money, but sometimes when the stock moves against them, the stock starts to move up, and the short sellers jump in at once to buy shares to cover their position. This is called a  short squeeze. When a short squeeze takes place, it can cause the stock to rise fast and hard. Any type of positive news can trigger the short squeeze.

So other traders take advantage of this situation buy looking for stocks to buy that may have a potential short squeeze. Here is what they look for:

• Short Percentage of Float ~ The float is the number of freely tradable shares and the short percentage is the number of shares held short divided by the float. Amounts over 10% to 20% are considered high, and potential short squeeze plays. 
• Short Ratio / Days to Cover / Short Interest Ratio -This is probably the most important metric when looking for short squeeze trades, no matter what you call it. This is the number of days it would take the short sellers to cover their position based on the average daily volume of shares traded. This is a significant ratio as it shows how "stuck" the short sellers are when they want to buy in their shares without driving up the price too much. Unfortunately for the shortsellers, the longer the number of days to cover, the bigger and longer the squeeze.
• Short Percentage Increase ~ This is the percentage increase in in the number of short sellers from the previous month.

So what stocks are heavily shorted that may be worth a closer examination? Check out the following list, but be aware, that often some stocks are heavily shorted for a reason.

Stock	Symbol	Short Interest	Days To     Cover
Insys Therapeutics Inc	INSY	86%	25
Pilgrim's Pride	PPC	66%	27
SolarCity Corp	SCTY	64%	8
Outerwall, Inc	OUTR	56%	24
Cal-Maine Foods Inc	CALM	52%	24
VASCO Data Security	VDSI	46%	24
Tokai Pharmaceuticals	TKAI	43%	26
MannKind Corp	MNKD	41%	21
Freshpet Inc	FRPT	40%	11
Wingstop Inc	WING	37%	21

Just keep in mind the risks. If you are looking for other stock ideas, check out many of the free stock lists at WallStreetNewsNetwork.com.

Disclosure: Author has a short put position on CALM (bullish).

By Stockerblog.com

3 Short Squeeze Stocks with Upcoming Earnings Announcements

A short squeeze takes place when the short sellers rush to cover their short positions when a stock starts to move up. This gives traders some interesting opportunities. If a stock is heavily shorted, and there is any good news, it could really spike.One of the most common types of good news is earnings that beat analyst estimates.

Here are a few heavily stocks with coming earnings announcements. Pilgrim's Pride Corporation (PPC) has an incredible 60% of its float shorted. It has a short interest ratio of 16; this means that it would take 16 days for all the short sellers to cover their positions based on the current daily volume. The stock trades at 9 times trailing earnings and 11 times forward earnings. The company will be reporting around April 27 to May 1.

King Digital Entertainment (KING) has 26% of the float held currently short, with a days to cover ratio of 11. The stock has a current price to earnings ratio of 9 and forward PE of 8. It expects to report between May 5 an May 11.

One more stock that short sellers are all over is NeuStar, Inc. (NSR), with 57% shorted, and a short interest ratio also of 11. The stock trades at 9 times trailing earnings and 10 times forward earnings. The company will be making its earnings announcement between April 14 and April 20.

Hopefully you can make money on the long side with the right stock that has a big short position. If you like interesting stock lists like this, check out the many free stock lists at WallStreetNewsNetwork.com.

Disclosure: Author didn't own any of the above at the time the article was written.

By Stockerblog.com

Make Money Buying Short Squeeze Stocks

One strategy that many stock traders utilize is purchasing short squeeze stocks. When a stock is shorted, it means that you anticipate profiting from a reduction in the price of a stock. What happens in the background is that you borrow shares of a company, sell those shares, then buy back those shares later at a what the traders expects is a lower price so that those shares can be paid back. You don't really see all the borrowing and replacement of the shares; it just appears in your account as a negative number of shares.

Short sellers often profit from this technique, but occasionally when the stock moves against them, the stock rises, and the short sellers rush to buy back shares to cover their position, creating what is referred to as a short squeeze. When this happens, the stock can increase in value very quickly. Positive news can cause the short squeeze to take place.

Stock traders profit from this situation by finding stocks that could have a potential short squeeze. Here is what they look for:

• Short Percentage of Float ~ The float is the number of freely tradable shares and the short percentage is the number of shares held short divided by the float. Amounts over 10% to 20% are considered high, and potential short squeeze plays. 
• Short Ratio / Days to Cover / Short Interest Ratio -A very important metric. This is the number of days it would take the short sellers to cover their position based on the average daily volume of shares traded. This is a significant ratio as it shows how "stuck" the short sellers are when they want to buy in their shares without driving up the price too much. Unfortunately for the shortsellers, the longer the number of days to cover, the bigger and longer the squeeze.
• Short Percentage Increase ~ This is the percentage increase in the number of short sellers from the previous month.

So here are some stocks that are heavily shorted.

GoPro (GPRO), the sports camera company, is a heavily shorted stock, with over 60% of the stock's float currently held short.

Pilgrims Pride Corporation (PPC) is also heavily shorted, with 58% of the float held short. In addition, the Short Interest Ratio is 19.7. This means that the approximate number of days to cover the position is 20 days, based on the current daily volume.

ITT Educational Services (ESI) has a short interest of 47%, and a days to cover ratio of 31.9. GameStop (GME) has 44% of the float shorted, with a short interest ratio of 42.3.

For other stock ideas, check out the stock lists at WallStreetNewsNetwork.com.

Disclosure: Author didn't own any of the above at the time the article was written.

By Stockerblog.com

How to Make Money Buying Short Squeeze Stocks

One technique that many traders use is buying short squeeze stocks. So what is a short squeeze stock and what is a short squeeze? First, for those of you who aren't aware, I will cover shorting stocks real briefly.

When you short a stock, it means that you hope to make money from a drop in the price of a stock. Technically what happens is that you borrow shares of a stock, sell those shares, then buy back those shares at a hopefully lower price so that those shares can be returned. Of course, this all happens electronically, you don't actually see all the borrowing and returning of shares; it just shows up on your computer screen as a negative number of shares.

Short sellers can make a lot of money, but sometimes when the stock moves against them, the stock starts to move up, and the short sellers scramble to buy shares to cover their position. This is called a  short squeeze. When a short squeeze takes place, it can cause the stock to rise fast and hard. Plus, any bit of good news can trigger the short squeeze.

So other traders take advantage of this situation buy looking for stocks that may have a potential short squeeze. Here is what they look for:

• Short Percentage of Float ~ The float is the number of freely tradable shares and the short percentage is the number of shares held short divided by the float. Amounts over 10% to 20% are considered high, and potential short squeeze plays. 
• Short Ratio / Days to Cover / Short Interest Ratio -This is probably the most important metric when looking for short squeeze trades, no matter what you call it. This is the number of days it would take the short sellers to cover their position based on the average daily volume of shares traded. This is a significant ratio as it shows how "stuck" the short sellers are when they want to buy in their shares without driving up the price too much. Unfortunately for the shortsellers, the longer the number of days to cover, the bigger and longer the squeeze.
• Short Percentage Increase ~ This is the percentage increase in in the number of short sellers from the previous month.

Now, what stocks are looking good for a short squeeze play? Let's look at Jakks Pacific (JAKK), the toy company, as an example. Almost 70% of the stock's float is held short. That's a huge amount.

In addition, the stock has a short ratio of 19.2, which means it would take almost 20 days for the short sellers to cover their positions, based on the average daily volume.

Earnings for the latest reported quarter jumped 16% on a revenue rise of 12.4%. The company will be reporting the earnings again sometime between February 24 to March 2. At 6.46 per share, the stock is already down by over 43% from from its high over the last twelve months, when it traded at 9.16 a share back in April.

It will be interesting to see how the holiday sales figures and earnings were during the fourth quarter. If you are looking for other stock ideas, check out the stock lists at WallStreetNewsNetwork.com.

Disclosure: Author didn't own any of the above at the time the article was written.

By Stockerblog.com