Sirius yields some quick profits
Posted by Blain Reinkensmeyer
March 23, 2006 at 12:00 pm
Sirius Ran up from $4.50ish to over $5.20 in two days last week on higher subscriber growth; this was oversold news. I shorted 500 in one of my client’s accounts at $5.14 Tuesday, and yesterday the stock fell about 5% to $4.86. Now, I have been watching Sirius after hours and for some unknown reason people think that they are getting good deals buying the stock after hours (after hours is extra volitile and has 10x less trading if not more). Anyway, I knew I could get another short a couple pennies higher than the close, so I shorted 1,000 more at $4.88 on the limit. It took about 10 minutes and sure enough I got it.
So, my short position is now 1,500 strong, and today of course the stock opened down and sold heavily. I waited and watched then decided to cover at $4.78 yielding over 6% on my original 500 shares short and almost 2% on my extra 1,000. There had been an unsual splurge of 2 million + shares bought 20 minutes earlier, and I figured just to talk away. Well, walk away I did and did I ever bank out on it. Not even 20 minutes later the stock ran up to $4.82, then $4.85, .89, make that .92, 30 minutes later .95, .99, and now the stock is trading at over $2!! Looking back the important aspect to note is the discipline to get out. I have made many errors on this holding stocks, and today is a perfect example of just walking away.
Next week is my last week to yield some profits in before Q1 ends, so we will see what fun I can stir up in a short period of time.
To the future,
I’m trying to understand short selling right now so I just wanted to get some clarification on what you were doing. You borrowed 500 shares of someone’s stock at $5.14 and sold it immediately, then borrowed 1000 more shares at $4.86 and sold that. Then bought back (covered) the 1500 shares at $4.78 for a profit where you returned your client’s shares to him and made a profit of $260. Do you have to pay your client part of that profit money or is returning his shares enough?
When I say my client’s account, I mean that I am making the trade in his account literally, not doing the deal with him. So, I shorted (sold 500 shares) at $5.14, then shorted (sold 100 more shares) at $4.86. I didn’t own any of the stock, and was selling shares I didn’t own. Then I bought back (covered) all 1,500 shares at $4.78. All the profit’s realized were in his account. I apoligize for not clarifying this in the post, hope that makes sense now. Excellent question Heidi!