jdubrox

Time to Short Financial Stocks - Starting with BofA

I whole-heartedly agree with JSwish, who pointed out the dividend factor. If you do as this article says, and short BAC at today's open/close price, you're then responsible for paying the dividend on that stock. I'm seeing an average dividend right now of $0.64 per share. Pay that each quarter, and you're paying ($2.56/sh/yr over $38.92/share) and there goes 6.58% of your capital. In my opinion, "paying money" and "Bank of America" in the same sentence mean "atm fees" and "mortgage payment", not paying BAC's dividend to someone else who's holding long. Then, if you're right by shorting BAC that the stock will go lower, if it actually does go lower, and BAC keeps the same dividend payout, you're going to be essentially paying any gains you've unrealized back to BAC long shareholders in the form of an ever-increasing yield of the dividend.

Good luck with that one.