There are several reasons why investors might choose to short sell shares rather than using other strategies like buying put options:
Time flexibility: Short positions don't have an expiration date, unlike put options. This allows traders to maintain their position for as long as they want without worrying about time decay.
Market impact: Large institutions can use short selling to create selling pressure in the market. By dumping a large volume of borrowed shares, they can potentially trigger stop losses and panic selling, which isn't possible with put options.
Liquidity: Some stocks may have thinly traded options, resulting in wide bid-ask spreads and lack of liquidity. Short selling can be more straightforward in these cases.
Less affected by volatility: While options prices are heavily influenced by volatility, short selling is less sensitive to these fluctuations.
Obscurity: Short interest is less visible than open interest in put options, which can be advantageous for some trading strategies.
Lower costs: In some cases, shorting stocks directly can be less expensive than buying put options, especially for longer-term positions.
Market efficiency: Short selling can help enforce fair value prices by allowing traders to act against overvalued assets, contributing to overall market health.
Hedging: Investors can use short selling to protect against potential losses in long positions they already hold.
Increased liquidity: Short selling increases overall trading volume, which can improve market liquidity.
SZL Price at posting:
$24.35 Sentiment: None Disclosure: Not Held
