Timely and Relevant News: Short Sells and What You Need To Know
You may have heard the news last week about stock prices of certain companies suddenly ballooning and/or experiencing extreme price volatility. In one case, the price of shares in one particular company rose over 1,700% since December 2020.1
What is Short-Selling and What is Happening?
Investors - including both individual and financial institutions - may make assumptions that certain downward-trending stocks will continue to move lower. They may borrow shares, sell them and if the price continues falling as anticipated, they then buy the shares back at the lower price and realize a profit. However, if prices unexpectedly move higher, then the investor must buy the shares back at higher price and will incur a loss. This is called “short-selling.”1 What is important to understand is that short-selling has an unlimited loss potential and is very risky.
At Covenant Wealth Strategies, we continue to seek out companies that we are proud to own on behalf of our clients and that we believe in their long-term economic potential. Covenant does not engage in day trading or short selling of individual securities. We remain committed to our clients' best interest and long-term strategic investment philosophy.
During this time it is important to not lose sight of your long-term goals and to maintain your perspective in the midst of market ups and downs. As always, we continue to closely monitor both market fundamentals, technicals and new developments.
If you have specific questions as it relates to this topic, we encourage you to call us at 302.234.5655 or email us at contactus@
Disclaimers:
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes.
Source:
1. NYTimes.com, January 27, 2021
Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
In order to sell short, you are required to open a margin account. Selling a security short involves greater risk, including the risk of unlimited losses in a position. Selling short is not suitable for all investors. Margin trading entails greater risk, including, but not limited to, risk of loss and incurrence of margin interest debt. Please assess your financial circumstances and risk tolerance before trading on margin.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.