When an investor believes that the value of a stock will decline in the near future, perhaps over the course of a few days or weeks, they adopt a strategy called a short position or short selling. When engaging in short selling, more commonly than not, investors do not own the shares that they are selling. Instead, they borrows those stock shares from their brokerage house and sell to another investor in the open market. A short seller will benefit from their short position as long as the price of that security will continue to move lower. When they are ready to close their short position, they repurchase those shares. This action is called buy-to-cover. Basically they buy back the same number of shares they were originally selling, giving back to their broker the shares they borrowed and closing their short position. As complicated as it might sound, this is a simple and automated process that takes place as so soon as the trader presses the "buy-to-cover" button on their trading platform. Short positions are classified as either naked or covered. A covered short is a short selling position initiated while owning shares of the stock that has been sold. When a trader sells a security while not actually owning it, this is known as a naked short. In this instance, the trader is using borrowed shares.
The market has been range bound for the last few weeks with volatility on the decline, and earnings all over the place. So where to go to look for a trade? Nike has already had Earnings and is near a low of the year, so seems like a good option. As a contrarian that can mean only one thing to me: I have to make a trade with the assumption it will go up from here over the next 45ish days. We will do that by making a Long Call Vertical trade to bet that it starts to head up over the next couple months. For more on my trading and how to join me in real time, see below. Watch the video to get the details. Kal Trading Risk Disclaimer All the information shared in this video is provided for educational purposes only. Any trades placed upon reliance of SharperTrades.com are taken at your own risk for your own account. Past performance is no guarantee. While there is great potential for reward trading stocks, commodities, options and forex, there is also substantial risk of loss. All tr