How would I go about doing this? Is it just simply a matter of opening a brokerage account and it’ll be one of the checkbox options available under account tools? Or is it something more involved?
Theoretically, you can short it right away. Realistically, you won’t be able to for about a month due to the lack of shares available to borrow. The SEC prohibits the underwriters (who hold most IPO stock) from lending shares out for 30 days.
Another method to ‘short’ a stock is by using options. You can purchase a put option that is out of the money and wait for the stock to crater, and rake in the cash when you sell the option.
It’s even safer, as you are only risking the capital used to purchase the option, and aren’t exposing yourself to theoretically infinite losses. Of course, the drawback is that the option has a definite end date, and you may run out of time before the stock dives to the low point you’d like it to reach.
Note that in order to do this, you’ll need to meet your broker’s requirements for options trading, which usually includes a minimum cash balance and signing a bunch of disclosures that you know what you’re doing.
Right, most brokers also require you to have margin permission as well. See your particular broker’s requirements.
BTW - I’m not a broker, I don’t endorse or condemn With Rye’s idea, and I certainly hope you aren’t dumb enough to think I know what I’m doing. Because if you are, you’re probably throwing your money away. So there, you’ve been warned, and don’t come crying to me if you lose your shirt.
I don’t know if this is possible in the US, but here in the UK you can use a spread-betting firm to make a bet on the closing share price (up or down). This also has the advantage here of being free from capital gains tax, as betting winnings in the UK aren’t taxed.
Out of interest, at the moment the mid-market quote for capitalisation at the end of the first day’s trading is $129bn.
Wow.
- Short Facebook stock.
- ???
- Profit!