“You’ve got to know when to hold ’em, Know when to fold ’em, Know when to walk away and know when to run, You never count your money when you’re sittin’ at the table, There’ll be time enough for countin’ when the dealin’s done”.
A key component in short selling is knowing when to close out a short or in the words of the Gambler knowing when to walk away. Earlier this week we closed out the one of our largest short positions in the Dividend Income Fund, a long standing short in Seven West Media. We see that investment research from the investment banks is generally near to useless for investors looking to close out a short as either a) the bank has ceased coverage of the stock, b) the company is still covered by the analyst who still has a buy recommendation despite the massive fall, as they are desperately hoping it will recover and they will keep their job or c) the analysis is far too negative and bitter towards the company that they believe has unfairly duped them.
In this week’s piece I am going to look at the mechanics of closing out a successful short position (essentially buying shares on the ASX to deliver back to its original owner), along with the dangers of being too greedy.
Read more here.