Your Questions About How To Pick Stocks To Short

Richard asks…

How to put a standing order to buy at a target price after selling short?

I’m trying to learn, and am on investopedia’s trading game to learn with fake money. So I did a short sale of CASY at $45 – obviously because I think its going to go down. Now, I want to put a standing order to buy to cover when it hits – say $41.00. I’ve tried doing this kind of thing before, but messed up (picking the wrong limit/stop option) and it ended up executing right away.

Can someone please explain under what circumstances I want to issue a Limit, and when to use the Stop? When buying a regular stock, I think I get it. A limit is a high limit – higher than my purchase price, and a stop would be a low limit to “stop the bleeding” and sell before it gets too low.

But, I can’t figure out the logic on the limit/stop options when putting in a future “buy to cover” order. Do I put in a limit or stop order to buy to cover when the stock lowers to $41?

I’m really trying to learn, I just don’t understand this in the short – then buy scenario.

John answers:

That would be placing a GTC ( Good till Canceled ) order to buy with a limit of $41. No stops involved.

For a buy order, a limit is the most you will pay for the shares and typically one places it above the current market price when one is happy with buying at the current prices. For a sell order, the limit is the least you are willing to accept for a sale.

It is possible that your broker will require you to place the limit above the current market price for a buy and below the current market price for a sale because they are not interested in sitting on a stack of orders placed with an exchange that won’t fill at the current prices. If that’s the case you need to place a stop order to buy with a stop of $41 and a limit of $41. The stop is a trigger so the stop order is really instructions to your broker to place the buy order with a limit of $41 but only if the market price drops to $41 or lower. As it’s just instructions to your broker, it doesn’t cost your broker anything to hold the stop in his computer, placing orders with an exchange however costs your broker a fee which they only recoup when they collect their commission on the trade from you.

As you would probably be happy covering at a price lower than your target, there’s no harm in placing a stop order to buy with a stop of $41 and a limit of $41 instead of a GTC order to buy with a limit of $41.

William asks…

Why do Liberals support GM?

Currently, there are no shares of GM available for shorting.

I got that message on my account, so I shorted TTM at $35.10 today and it is currently at $32.50!!!! GM meet dip below $30 bucks, by the end of this month!! Lololololl

GM’s volt is an utter failure, whereas (tsla) ev is several years ahead against the Overpaid Government Union slugs.

I truly HOPE GOV Motors fails and it is funny how bagholders are already losing money in GM, unless some bought pre-IPO. The Proletarian Liberals have no clue what I am talking about, but they are experts at picking the best dancer on “Dancing With The Stars”! Let’s see if anymore liberal whack jobs shoot their t.v, just because Palin’s daughter was on that show!!

GM is going to drag ford motors common stock down for the short to mid-term, therefore, I am betting that shorts will continue to make money from the inflated auto industry stocks for several weeks.

It is amazing how the DJIA is at 11k, while we experience negative tail winds from N. Korea and the EuroZone debt crisis. The factors that can drive DJIA to 12k would be QE3, a lower $, higher commodities, etc..

Wall Street remains strong with their V shape recovery, while main street experiences a 1990’s L shape recession.
GM Union thugs make Over $60 bucks a hour when you include welfare/health benefits.

That is clearly NOT middle class, but upper-middle class.

John answers:

General motors isn’t really supported by liberals, it’s just a major corporation that if it had failed, would have caused over a million people to loose their jobs.

What a great guy you are, rooting for GM to fail, you hate Obama so much you spit on Americans who are struggling to hold onto their jobs.

John asks…

LONG TERM investors and stock markets?

Now seems like a terrible time to buy for a lot of people that’s why the major sells offs going on this month. This is the worst possible market for short term investors but what about people who don’t care whether or not they lose that money now because they’re waiting for long term results? I’m going to retire in like 40 years, i honestly think the US economy and European will pick up within the next 2-5 years. After 2008/2009 recession the stocks went back up to their highs from their 5 year lows during recession. The money i have in the market i have there because it won’t bother me if i lose it now because i know in long term i’ll get it back. Plus if i do buy more shares in few months during possible recession then in 2-5 years when economy picks up i can be selling with great profits. I’m basing this on recent recession and how the markets rebounded. I’m expecting same to happen in future. (btw i like big dividend stock companies, you know large well known name companies) Am i right, am i delusional, should i invest if or when there will be a recession if i’m very long term or should i just stay away?

John answers:

Right now is the perfect time to invest for the long-term, and to be looking at dividend stocks. I am a 20 year old investor with an eye for the long-term. Today I bought some shares of SPLS (Staples), which has been doing great in terms of profits and revenue, yet the stock price has done horrible (over the past few years). The stock price is disconnected from the company’s fundamentals. The stock currently yields around 3% dividend, and I expect this to be a good stock to hold for the long-term. Of course, who knows when the market will finally realize that a particular stock is a strong company. It could take years for the market to truly appreciate this stock, but the best strategy is to make sure you are invested in quite a few companies (not just one) to reduce firm-specific risk a company may face. I’ll admit, it is hard putting money into a company when the stock market is doing so poorly, like right now. What I suggest you do is find good companies that you are sure are a good price, and buy in. DO NOT look at the stock every day because you will only be discouraged by the short-term losses you may incur. You must also realize that the investors who bought in early 2009 were greatly rewarded when the market reversed its course. Even those who bought in late 2008 (November, for example) and bought too soon before the bottom are in great shape right now. My suggestion is do not invest all at once. Invest some portion now, wait a month and invest more, wait a month and invest more. We could certainly see some more downside, especially through September (as a result of budget cut negotiations in Washington), and you do not want to invest all at once, you can never know what the market might do tomorrow. For example, you might try investing $1,000 per month. At least that way, if the market continues to tank over the next few months, you haven’t bought all in at higher price. If you have anymore questions feel free to msg me. I suggest you look for companies with attractive, steady dividends. Those are dividends you can expect to increase 50fold in a 40 year period. Coca-Cola for example has increased to 60x the dividend of 40 years ago. This is just an example, but something to think about. If you play it right, you will end up with dividends payments every quarter that will pay for everything you may need, and more.

George asks…

What are the “rules” of who you pay to babysit?

My mother in law offers to pay my husband to babysit his half sisters. They are 8 and 10. We’ve been babysitting for the past two years (off and on about 4-10 times per year). She never discussed payment with us, and just gave us $40. We did however state that the children needed to be sent to us with food because they’re fussy eaters and we were usually given short notice and didn’t have “children’s meals” stocked in our house. Last Saturday my MIL realized she was leavnig for the weekend and her kids would be home alone. She asked my hubby if we would babysit, and he asked me. I told him for $50 plus gas, I would babysit the weekend. She agreed, I didn’t think she would because that’s a lot of money.

My mother in law will not babysit for us. There was one time we went grocery shopping and we dropped our baby off at her house so she could spend time with her grandchild and we could go to the store. It was only for an hour. She called us saying we had to come pick up the baby because she was crying. Apparently she learned nothing while raising her 4 kids… she didn’t know how to help a baby stop crying?!?!? We didn’t offer to pay her since she is the baby’s grandma afterall.. should we have to pay grandma to spend time with her own grandbaby?

I feel it’s appropriate to be paid to watch my MIL’s children because we have no obligation to spend time with her kids. We also live 40 minutes away and we have to pick them up and take them home, she never drops them off/ picks them up. My sister in law (age 16) will not watch her neice without being paid. We gave her $10 to watch our daughter for an hour before. If we don’t pay her, she usually puts our daughter in a chair and goes online and completely ignores her neice.

So what are the unspoken babysitting rules? Who should have to pay who???
Why should we have to babysit for free when my mother in law won’t babysit, period?
If it helps, the kids are always misbehaved and no, I never want to actually babysit them, that’s why she offers to pay us.. as a bribe. I know it sounds awful, but that’s the only way anyone would babysit her kids. They involve a lot of cleaning up after, extra electricity and water! We’re already on a tight budget, we rent, and the kids have been known to cause damage including peeing on my couch. It would be different if the kids were older and behaved. For instance, my 16 year old sister in law. We will have her over to go places with my husband and we don’t get paid to watch her or feed her. We just don’t do that often.
The 16 year old won’t watch her sisters unless she gets something in return. Either a trip to the mall, money, clothes, shoes, a handbag, etc. For being a low-income family, they are brats. The 16 year old also is the reason we have to babysit. She goes out and sleeps over at her friend’s houses and leaves her sisters home alone. My MIL doesn’t find out until last minute and has my husband bring them to our house to watch them. What family drama!

John answers:

Personally, i don’t think any of you should have to pay each passed what you spend in gas because you’re family and it’s nice to help each other out and spend time together.

No, it’s not fair that you two babysit her kids at the last minute when she isn’t able to watch them while she can’t take the time to spend with her grandchild. I would talk to her about that and about how it makes you feel. If worse comes to worse, tell her that you’ll no longer babysit for her and you’ll see them at family events. Otherwise, set up a payment play for both families.

Lisa asks…

How much stock should I put a Gemini woman with a Pisces man?

Hi all! I’m a typical Gemini… creative, artsy, short attention span, ambitious. I love to do a million things at once, I’m not overly emotional (in private I’m more sensitive) and I like change. As an air sign, I notice most of my closest friends are also air – Libras, Aquariuses – altho I do have some fire sign influences too. Most of my past relationship signs have been with Aries – usually unaccomplished men or Earth signs – that turned disasterous.

But.. I have been mystified by some Pisces men in the past – usually philosopher types.. who I’m drawn to, but the relationships never went anywhere. What do you think? I recently met a really deep, intuitive and artistic friend who I like a lot and is a Pisces. At the same time, maybe he thinks I’m too flighty for him or he’s too complicated for me? Will he be too moody for me? Or will be bring out the best passion in me? What are Pisces men looking for?

I don’t pick/date men by Zodiac signs, btw. Just curious.
Thank you!
Ps. One thing in common with a Pisces – I *sooo* want that physical, emotional and mental connection with my partner – or aka, soulmate. I know soulmates may be too high of an expectation, but I believe there are more than one out there for everyone…

John answers:

Yes, could work, just respect his emotions and be sure to never criticize him too harshly and always make him feel that you love him/accept him, despite his flaws—that will surely keep him with you. Pisces also need someone who is outgoing, they are very outgoing themselves, yet can prove to be quite shy–though they rarely let that stop them from getting to know all sorts of different kinds of people. It will most likely be a good match….just remember to show compassion towards others and things in general and to not neglect your emotions or that of anybody else’s, for water signs feel that emotions are of utmost importance and that understanding them provide the solution to any problem.

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