To Short or Not to Short that is the question???

Let me explain the risk-reward profiles for long and short positions:
Long Position:

When you buy an asset (go long), you purchase it hoping its value will increase
Maximum loss: Limited to your initial investment (if asset goes to $0)
For example, if you buy a stock at $100, your maximum loss is $100 per share
Maximum gain: Theoretically unlimited, as the asset's price can keep rising
If the stock goes to $200, $300, $1000+, your profit keeps growing

Short Position:

When you short an asset, you borrow and sell it, hoping to repurchase it cheaper later
Maximum gain: Limited to your initial sale price (if the asset goes to $0)
For example, if you short a stock at $100, your maximum gain is $100 per share
Maximum loss: Theoretically unlimited, as the asset's price can keep rising
If the stock rises to $200, you lose $100; at $300, you lose $200, and so on

The asymmetric risk-reward comes from math:

Long positions: Asset can't go below $0, but has no upper limit
Short positions: Can only profit until $0, but losses grow with each price increase

Shorting comes with several additional costs that make it more expensive than going long:

Borrowing Costs (Short Interest)


You must pay interest to borrow the shares you're shorting
Rates can range from very low (0.25%) to very high (50%+) annually for hard-to-borrow stocks
This cost reduces your profits or increases losses over time


Margin Requirements


Need to maintain a margin account with collateral
Higher margin requirements for short positions (typically 150% of position value)
Risk of margin calls if the position moves against you


Dividend Payments


Short sellers must pay any dividends to the lender of the shares
This is an additional cost that long position holders don't face
Can significantly impact profitability for high-dividend stocks


Stock Recall Risk


The lender can recall their shares at any time
This may force you to close your position at unfavorable prices
It is particularly risky during short squeezes

These costs mean that even if your directional view is correct, you might still lose money on a short position due to holding costs.

Asymmetrical Moves
"Markets take the stairs up but the elevator down"
The opposite happens more often!

During bubble collapses and market crashes:

Downside moves can be gradual as denial, hope, and orderly selling create a stepped decline
Some investors average down, providing temporary support
Circuit breakers and trading halts can slow dramatic falls

During upside rallies, especially

short squeezes:

Price can explode upward very rapidly as shorts rush to cover
Fear of Missing Out (FOMO) creates buying panic
Margin calls force immediate buying
Limited available shares can cause bidding wars

Now let's evaluate the same thing for Options Trading:
in a hypothetical situation, a call option can theoretically move toward infinity, whereas a put option has a limited downside.

Here’s why:

A call option gives the holder the right to buy an asset at a fixed strike price. If the underlying asset’s price keeps rising indefinitely, the call option’s value also increases indefinitely. In theory, there's no upper limit to how high a stock price can go, meaning a call option's price can rise infinitely.

A put option, on the other hand, gives the holder the right to sell an asset at a fixed price. However, the lowest a stock can go is zero, which means the maximum intrinsic value of a put option is limited to its strike price. For example, if a put has a strike price of $100 and the stock price drops to $0, the put would be worth at most $100 per share. Unlike a call option, a put option has a finite maximum gain.

Thus, while a call option has unlimited upside, a put option is constrained by the fact that an asset’s price can only fall to zero.

The final Verdict:
Do not short PLTR or other bubbles, if you want to do so, at least buy Put options to limit your risk!