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looking at the markets with David Modell
so you're thinking about shorting or
short selling marijuana stocks well I
want to recommend against it and I'm
going to tell you why and I'm going to
show you a couple of examples marijuana
stocks are usually low priced stocks
penny stocks for example most of them
are many of them are penny stocks and
these are volatile stocks these are
stocks that can go yes they can go down
10 20 30 or even fifty percent in one
day sure and if you're thinking that you
might profit from those kinds of down
moves then yeah you maybe you're
considering short selling the stock but
they can also move up a lot in one day
they can move up 10 20 30 50 100 or even
more than a hundred percent in one day
or in a few days or in a few weeks it
can happen and it does happen and if you
short or short sell a marijuana stock
and then it goes the price goes way way
up you can actually owe your broker more
money than you have
it's not just a matter of losing all the
money in your trading account you can
actually lose more than that you can
lose everything in your in your account
and owe more money to your broker
because it's not like you bought a stock
and then it went down see a stock can
only go down so much the price of a
stock can only go to zero so when you
buy stock you cannot lose more than what
you paid for that stock but if you short
or short sell a stock theoretically the
price of a stock can go up higher and
higher and higher there's no you know
there's no ceiling to it there's no end
so theoretically you could just go up
forever and you could just Oh more and
more and more money until you actually
have to pay your broker more money than
you even have and you can get margin
called and they could liquidate your
account and things can get really bad
and I want to show you an example this
is not a marijuana stock but this is a
market watch article and this is a it's
a biotech stock it's kalobios kbi oh and
again not a marijuana stock but shows
what can happen here's a trader who lost
over a hundred thousand dollars and he
shorted or short sold this stock he
thought I guess maybe he thought it went
up too much and that it was going to go
down but this stock because of some news
it just went way up overnight and you
really you know you don't always have
control over what happens especially if
it's after trading hours if it's
overnight you might be helpless to even
cover your short position until the next
trading day and so this person owed a
lot more than he had in his hands
trading account it says here according
to the MarketWatch article
he had around 37 thousand dollars in his
etrade account and then he woke up the
next day not only was that wiped out he
actually owed over a hundred thousand
dollars and he it says here he may end
up liquidating his 401k and his wife's
401 K so Penn I'm not you know if you
think I'm trying to scare you i'm not
trying to scare you i'm trying to make
you aware of the risks and this is why i
don't recommend short selling any low
priced penny stock and that would
include marijuana stocks which are also
capable of skyrocketing very quickly in
price let me show you another example
and this is a marijuana stock this is
mjna and and this has a similar chart
too many marijuana stocks they they
peaked a lot of them right around the
November early November election in 2016
recently and so imagine if you you know
that the stock was trading at around six
cents here in October and then it went
up to seven cents and eight cents and
you might have thought well that's
that's a pretty big gain there I think
it went up too much I think I'll short
it here and then
well then if you had shorted there it
went sideways and then it went up to ten
cents and then it went sideways and then
it went up to twelve cents and then up
to 13 and 16 so it's already doubled in
price and now it's up to 23 cents over
here at the peak and you can see that it
went down after that but you wouldn't
have known that you only know what's
happening in the present and what
happened in the past and so at this
point in time you would have shorted it
at around eight cents and now if you
wanted to cover your short position or
buy back the shares of stock it would
have cost you twenty three cents a share
and that would be probably pretty
devastating to your account and if you
think you'll just sit through it and
wait until it goes down well it did go
down but you didn't know that was going
to happen you probably would have been
getting emotional all the way up
watching you know watching yourself lose
watching your account go down and down
and down until you oh you don't even
have money anymore now you owe money
possibly to your broker also your broker
might not have had the patience to sit
and watch you owe them more and more
money brokers are known to liquidate
your account and initiate a margin call
whether you like it or not if your
position if you're short position goes
against you badly enough which this this
would be a case of that possibly
happening okay and also who
you know who knows the the stock might
have just kept going up and up and up
past 23 cents now what actually did
happen was it went down but so far
months and months later or at least a
you know a couple of months later
because if you know now it's 2017
already and the stock still has not gone
down to eight cents it's still 16 almost
17 cents it's it's still worth twice as
much and so you'd still be in big
trouble all right so that's my argument
to you against shorting or short selling
penny stocks I recommend you don't do it
just because the risk theoretically is
infinite you can lose so much money so
quickly and that's true of any low
priced stock now with higher priced
stocks such as you know Amazon or Google
or something like that you know I know
those are not marijuana stocks but with
those stocks you don't even have to
short those either you can buy put
options and i have videos about buying
put options and call options and things
like that but for marijuana stocks
generally speaking right now they don't
offer put options and so you can't buy
puts on those stocks right now maybe
that'll change someday but for right now
i recommend only going long if you feel
like you must invest or trade low-priced
stocks such as marijuana stocks not that
I'm recommend recommending that you buy
or sell anything right now I'm not
telling you what to do I'm just telling
you what I don't recommend for myself
alright so I hope this was helpful to
you and if it like to email me at any
time maybe you have questions or maybe
you'd like to put together a trading
plan because you know I certainly
can help you with that or an investing
plan my email address is David Modell @
gmail.com and you can contact me anytime
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so much for watching I appreciate it and
I'll talk to you again soon