Sunday, May 16, 2010

Making Money on the Downside: BP

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On April 20, 2010, as soon as the news of the oil spill broke, I felt there was an opportunity. Yes, indeed! BP was the owner of the disaster. So I shorted BP at $57 and on May 7th, I covered. Made 17% return on my money--not too shabby.

Selling short is an investment technique in which you bet on the losing horse. Well, I felt that BP was the losing horse. One thing, though, you must not be too greedy. While many would expect a 17% on a short too puny a return--I'm satisfied.

I invested $100,000 and made $17,000. I wanted to sell only $10,000, but the opportunity was there, so why not go for it? Now, the same results can be obtained by investing only $10,000 but buying call options. But this is a technique that requires more sophistication and experience.

Keep abreast of the news. Cynical as it may sound, what is a disaster for some, could be an advantage for others.

Alesya Nazarova modeling a dress by Bebe - Pho...Image via Wikipedia

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Making Money on the Downside:BP

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