Stop Shorting Penny Stocks
A reminder from my incredibly rich mentor that I sat next to a few years back for those who still don’t get it…
Shorting stocks under 5 cents (honestly, anything under 10 cents) is insanely stupid.
His message was a bit more clear when someone on the desk was doing it. "Hey bro, are you f*cking retarded? Why are you shorting a 5 cent stock?"
You’re not taking it to zero. You’re likely paying borrow fees, commissions, and the risk is so skewed against you it’s laughable.
“But it’s trading insane volume and is over extended! It's an A+ over-extension opp". Great, you can make 1-2 cents at the very best but after borrow fees, commissions, and likely churning on it a few times to get it "right", it is very unlikely...
Now flip that. Buying a strong close on massive volume in a 5 cent stock? That could be a major opportunity. You’ve got to understand the nuances that separate the good ones from the garbage ones which takes times, but sometimes you’re risking 1 to 2 cents to make a lot more.
Take a turd like $HCTI on June 11, 2025. Traded over a billion shares. Ramps after hours. You buy at .017 with maybe a half cent of risk overnight. Potential? Who knows. Could be 3 cents, 5 cents, maybe much more.
That kind of asymmetry is rare and you should take that trade (my opinion only) when it shows up. Risk half a cent to make multiples? That’s the dream.
These trades don’t come often. Maybe a couple times per year. But when they come around, they are special!
We talked about this one yesterday in our free overnight momentum chat. You can join here. The more we share, the better we become.
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