There are several ways to profit from a falling stock, but for tonight we are going to discuss the two most basic principals, shorting stock versus buying “put” options.
If you have been with us for any length of time you know I have written many times about how to “short” a stock. Basically you are simply selling a stock now, taking in the cash for the sale, and “buying back” or covering the sale at a cheaper price. so if you “short” ABC at 60 dollars and you sold 1000 shares, you took in 60,000 dollars. Now if ABC falls to 50, and you “Cover” you are buying it back cheaper. In this case you will spend 50,000 dollars. The difference between where you sold and what you spent, 10 G’s is your profit.
