Is Shorting Ethical ?

vince · #1 31st May 2006, 12:41 PM

I make this post because I see many boarders showing a sympathetic attitude to a falling market and making a villain out of a correction or even a short term bear trend whereas the fact is that it is the markets way of flushing out the excesses of the previous move. No market can remain in a bull or bear trend forever.

Is shorting stocks ethical?

Some people claim that shorting stocks is un-ethical because they are contributing to the stock price going down. This is nonsense, and equally illogical is the fact that shorting is not allowed in our markets except intraday and fno. Remember that after you short a stock, you then have to buy it back! This creates buying pressure on the stock.

Short sellers slow the rapid decline of a stock by buying to cover on the way down. If the short sellers were not involved in the stock, it could plummet into a very rapid decline; ( Imagine only sellers and no buyers? Also, short sellers can be caught in a "short squeeze".

There is nothing wrong with shorting. It's just part of the mechanics of the stock market.

I think it is essential that a trader learn to short stocks. Buying stocks is only half of the equation! If the market in general is in a downtrend, you are not going to want to be buying stocks and attempt Hara Kiri. So in order to make any money you need to learn the art of shorting.
Sometimes you can make money faster by shorting than by buying. Why? Because stocks typically go down at a faster rate, then when they go up! Fear appears to be much more powerful emotion than greed.

The general public thinks that if a stock goes up, then this is "good". If a stock goes down, then this is "bad".

Wrong! It depends on which side of the market you are on.

I think Dalal Street really doesn't want the public to know about shorting stocks. In a bear market, market professionals on TV talk about how "horrible" the market is to encourage investors to sell.

They are shorting stocks and profiting all the way down...

srisara · #2 31st May 2006, 12:46 PM

its ethical because Markets (NSE and BSE) themselves allow it. If its wrong let them Stop it.

Satya

rvgandhi · #3 31st May 2006, 12:56 PM

Quote:

Originally Posted by vince

Is shorting stocks ethical?

I think Dalal Street really doesn't want the public to know about shorting stocks. In a bear market, market professionals on TV talk about how "horrible" the market is to encourage investors to sell.

They are shorting stocks and profiting all the way down...

These lines sum up what the market players excel at... create a sense of fear and greed amongst the common man and make money along the way

inxsofme · #4 31st May 2006, 12:56 PM

Hello,

I think it's ethical and also helps in discovering value as those who are shorting they think that the co. is expensive at that price and that helps in discovering the right value.

Cheers
Gaurav

marcus · #5 31st May 2006, 02:47 PM

Vince do you mean shorting as in short selling in the cash segment?

vince · #6 31st May 2006, 02:58 PM

Quote:

Originally Posted by marcus

Vince do you mean shorting as in short selling in the cash segment?

If you are referring to the thread title marcus, I meant short selling , whatever the segment.

munchikana · #7 31st May 2006, 05:40 PM

Hi vince,
Shorting is perfectly ethical. Because, to quote Sri Sri Ravishankar, "Opposite values are complimentary to each other". In nut shell, you will realise the importance of long only when you realise the pain of short. If there is dark, there must be sunshine. If there is pain, there must be pleasure. Unless we have opposite values, we will never realise the real worth of the things. Unless we have pain, we may not what is "pleasure". Unless we have dark, we may not realise the importance of sunshine. So do not complain about short selling. Long and short are two faces of the same coin. Learn to enjoy both.

vince · #8 31st May 2006, 06:02 PM

Quote:

Originally Posted by munchikana

Hi vince,
Shorting is perfectly ethical. Because, to quote Sri Sri Ravishankar, "Opposite values are complimentary to each other". In nut shell, you will realise the importance of long only when you realise the pain of short. If there is dark, there must be sunshine. If there is pain, there must be pleasure. Unless we have opposite values, we will never realise the real worth of the things. Unless we have pain, we may not what is "pleasure". Unless we have dark, we may not realise the importance of sunshine. So do not complain about short selling. Long and short are two faces of the same coin. Learn to enjoy both.

I am not complaining at all , and I have enjoyed the past few days immensely.

bipin61 · #9 31st May 2006, 08:02 PM

I have had no position in the market for the last few days and have also enjoyed myself immensely.I have experienced neither the pain nor the pleasure only the enjoyment.

Agilent · #10 31st May 2006, 11:26 PM

Quote:

Originally Posted by inxsofme

Hello,

I think it's ethical and also helps in discovering value as those who are shorting think that the co. is expensive at that price and that helps in discovering the right value.

Cheers
Gaurav

A good, succint response to the question, indeed.

Shorting is entirely ethical and in fact allowed by RBI in intraday trade of Govt Secs, for example

However, shorting can sometimes be unethically executed (see link)http://www.investopedia.com/universi...rtselling4.asp

By the way, shorting is disallowed in USA except on 'upticks'. Maybe some day we will have that rule in India.

AGILENT