The Secret Life of H.G. Carrillo



galatea a short story :: Article Creator

30 Best Short Books You'll Ever Read

30 Best Short Books to Read in 2024 — Easy Books to Read in a Day

Skip to main content

Page count: 192

From the author of We Cast a Shadow, a finalist for the PEN/Faulkner Award, comes a short story collection that brings New Orleans to life. Published in August 2021, The Ones Who Don't Say They Love You examines characters living on the margins of the Big Easy. Whether rendering an army vet, a couple struggling for money, or a group of teenagers, Maurice Carlos Ruffin attends to his characters with wit, joy, and magnificent heart. Some of the stories can be consumed in a single sitting. All of the stories deserve a second read. After that, check out more great books by Black authors.

Looking for your next great book? Read four of today's bestselling novels in the time it takes to read one with Reader's Digest Select Editions. And be sure to follow the Select Editions page on Facebook!

Page count: 160

This 2018 New York Times best-selling memoir is both brief and devastatingly beautiful. Terese Marie Mailhot is from Seabird Island Band, a First Nation in British Columbia, Canada, and is one of a small but growing number of acclaimed indigenous authors who are making visible what many have been unwilling or unable to see. In exquisite and ruthless prose, she grapples with trauma in its many devastating forms. She shows how generations of harm have cycled in her family, all bound by silence before she took up her pen. Her writing makes vivid both violence and tenderness. For fans of memoir, Mailhot's story is essential reading.

Page count: 110

This modern classic, about a Latina girl growing up in Chicago, has been translated and taught all over the world. Written in 1984, it has also gone through periods of being banned. At fewer than 150 pages (depending on the edition you purchase), it packs a punch well out of proportion to its size. Few other novellas have left such a lasting mark. Unsurprisingly, given the compression and power of her work, Sandra Cisneros is also a poet. She renders each vignette in this book in unforgettable imagery. If you haven't read it yet, you can easily catch up in a few hours.

Page count: 64

National Book Award winner Jesmyn Ward has a catalog of books that are each too long to make this list. But the beautifully illustrated Navigate Your Stars fits perfectly. Based on the 2018 commencement address she gave at Tulane University, this 2020 book can be read whenever you need a boost of inspiration. Ward traces her family's history through her own, sharing stories of her grandmother and parents. In a nurturing and encouraging voice, she writes of the realities of life, how much hard work is needed to thrive, and what different ways of persevering look like. This lovely book makes a perfect graduation gift or mini coffee table book.

Page count: 272

Yes, this is over our 250-page limit. But hear us out: While this may not be a short book per se, it's undeniably a quick read. Many of the pages in this innovative debut novel hold only a paragraph or a handful of letters. Ghost Forest, published in 2021, is the story of a family that immigrates from Hong Kong to Canada. Left behind is the father, who continues to work in Hong Kong and dies soon after. Through his daughter, Pik-Shuen Fung explores how to grieve the loss of that which is already absent. The abundance of space on each page reminds the reader continually of absence, and the story speaks to anyone interested in themes of grief, immigration, or family. If your reading time happens during your commute, you'll be pleased to know this is available as an audiobook too.

Page count: 192

Jenny Offill has redefined brevity in literature. Each chapter, paragraph, and sentence seem so carefully distilled that not a single extraneous word can be found. Her laser-sharp concision is like a broth boiled all the way down—each morsel is incredibly complex and full of depth, making you return for more. In Dept. Of Speculation, she explores the layers of a loving marriage gone wrong. On more "book of the year" lists in 2014 (when it was released) than there is space here to mention, this novel will be a favorite for anyone who appreciates craft, depth, and page-turning storytelling. See more of our favorite fiction here.

Page count: 203

This beauty of a memoir, which was published in 2020, is structured around letters from the author's mother during years of separation. When E. J. Koh was only 15 years old, her parents moved to South Korea for work, leaving her and her brother to navigate life in America on their own. Years later, Koh found the letters in a box and set out to translate them, weaving them into a captivating story you won't want to put down. Koh and this book have won multiple awards, making it a great choice for a mother-daughter book club. Her use of language casts a powerful spell on any reader, bringing layers of the human experience to light.

Page count: 124

The Mexican author Juan Rulfo (1917–1986) did not begin writing until his 40s and then published only one novel, in 1955. Yet Pedro Páramo, embracing a world both past and present, is considered a masterpiece of 20th-century literature. Lauded Latin American novelist Gabriel García Márquez claimed that he knew the entire book by heart. If you're looking for a quick novel to transport you on surreal adventures, this one's for you. Here are more books by Latinx authors to check out.

Page count: 128

For readers interested in poetry, this one's for you. Andrea Gibson is one of the most popular spoken word poets today. In this latest and most expansive collection, Gibson explores things as far as space and as close as illness. "Many of the poems in this collection were written at an octave of compassion that was often out of my daily range," Gibson shared on social media. "It wasn't until my cancer diagnosis that I could consistently reach those high notes." This collection sings, revitalizes, and heals. If you're new to poetry, this book of poems, published in 2021, is a perfect entry point, as they are approachable, vulnerable, and undeniably powerful. Keep the good reads coming by signing up for one of these stellar book subscription boxes.

Page count: 96

Poetry collections are a great option if you're looking for short books that pack an emotional punch. This slim collection, published in 2020, is brimming with energy, insight, and tenderness. A finalist for both the 2020 National Book Critics Circle Award and the 2021 NAACP Image Award, Homie is both celebratory and unflinching. Danez Smith, a Black and LGBTQ+ poet, writes from a place of deep love. These poems vary in theme and tone but as a collection serve as an exaltation of friendship, connection, and being alive.

Page count: 112

A New York Times top book of 2018 from MacArthur fellow Terrance Hayes, this poetry collection takes the sonnet form to new heights. In popular culture, sonnets are often associated with love poems, but in Hayes's hands, they tackle so much more: political structures, father-son relationships, time, and mortality. Each 14-line poem is packed with alliterative sounds, rich syllables, and infinite meaning. For lovers of language and innovation within form, there's no better book than this one.

Page count: 210

Coauthor of the international best seller Ask Your Angels Andrew Ramer brings us a truly unique tale of the oldest woman in the world. Deathless comes in the form of the "autobiography" of Serach bat Asher. Though she's mentioned three times in the Hebrew Bible, her stories are not included there, and now, living near the beach in Los Angeles, she's here to rectify that. Channeling spirituality, imagination, and in-depth knowledge of the Torah, Ramer writes a story for all who love to learn through speculative fiction. This 2018 book is visually small but densely packed with knowledge that only a 3,000-year-old woman could confer.

Page count: 192

Territory of Light by Yuko Tsushima was originally published as a series of short stories in Japan in the late 1970s. It has since been compiled into a novel, the English translation of which was published in 2018. What appears to be a quiet story of a divorced single mother finding a new life, Territory of Light teems with profound questions and immersive images. Book critic John Self calls it a "hidden masterpiece." Because of its original format, each chapter is self-contained and also seamlessly connects to create an emotionally rich journey, making it the perfect short book for anyone who reads in small bursts of time.

Page count: 96

If you haven't read The Little Prince, you're in for a treat. Written in 1943 and considered one of the best children's books ever written, its wisdom never gets old. This is one of those short books that can be read in one sitting but also savored over a lifetime. The story of a stranded aviator getting to know a prince from another planet will delight readers of all ages and generations. It's one of those easy books to read that offer truly profound lessons below the surface. Its watercolor illustrations, also done by the author, add to its tenderness and sense of immediacy.

Page count: 42

This is the shortest of the short books on our list and one of the oldest. These ten compiled letters from celebrated poet Rainer Maria Rilke to a young mentee were written between 1903 and 1908. Their wisdom and beauty shine through today, making this book a timeless gift, perfect for the aspiring writer in your life. If you're looking for quick reads that offer life lessons and questions to contemplate, this is one to add to your list.

Page count: 190

Renowned poet and author Sylvia Plath puts much of herself in main character Esther Greenwood's struggle with depression and mental health. Published just before Plath's death in 1963, this unforgettable novel gives us an intimate view into the mind of a brilliant and misunderstood writer. If you've been meaning to read Sylvia Plath (and you should), The Bell Jar is a good starting point. It also made it onto our list of most controversial books.

Page count: 76

Yes, we promised no War and Peace, but we didn't promise to forego Leo Tolstoy altogether. The Death of Ivan Ilyich is your opportunity to read a masterwork by one of the greatest writers of all time. You can do this, dear reader. Page count depends on which edition/translation you grab, but all are well under 150 pages—much, much shorter than War and Peace's whopping 2,201 pages. This book may have been published in 1886, but to this day, no one is wiser than Tolstoy about death and dying—or living, for that matter.

Page count: 96

Heinrich Böll (1917–1985) was a German writer who won the Nobel Prize for literature in 1972. He was known for his short stories, novels, and this, the memoir of his life between 1933 and 1937, which he published in 1981. This brief, wrenching account of growing up in Nazi Germany in a family that hated Hitler will leave you thinking of nothing else. Here are other must-read Holocaust books.

Page count: 200

If you're seeking short books that can be read in digestible chunks, essay collections are a great way to go. This dynamic 2020 book by debut author Sejal Shah received rave reviews and continues to gain momentum. It's filled with essays taking creative forms that NPR says "should inspire and enlighten other essayists." Shah shares her American experience as the daughter of immigrants navigating between cultures and locations. In these pages, she redefines, broadens, and makes more space for intersecting identities.

Page count: 206

Toni Morrison, winner of both the Nobel Prize and a Pulitzer, is a true icon. She gave us ten novels, seven books of nonfiction, and three children's books. If you haven't read her work yet, The Bluest Eye is a perfect starting point—it was her first best-selling novel (in 1970) and is under 250 pages. With her signature poetic prose, Morrison tells the story of Pecola Breedlove, a young Black girl who longs for her eyes to turn blue, and the nightmare of that dream coming true. After this, read one of the best books about race relations in America.

Page count: 128

Kate Chopin wrote only two novels before she died in 1904. The first is largely forgotten, but the second, The Awakening, is now considered a classic. At the time of its publication in 1899, it was widely condemned for portraying a woman who, trapped in a loveless marriage, has an affair. In the 1970s, the slim book found—and held—its audience.

Page count: 80

Adored author Chimamanda Ngozi Adichie shares the story of her father's death in this moving mini memoir from 2021. The book is actually an expansion of a New Yorker essay published in 2020. Amid the COVID-19 pandemic, her celebration of her father's life and mourning of his death help all of us process the communal and personal griefs of these past years. For anyone who has suffered loss, this book will tug at your heartstrings and serve as a balm.

Page count: 64

Ntozake Shange's 1975 masterpiece defies category: It is performed as theater but reads like a gorgeously urgent prose poem. As a play, it won Tony and Obie awards, and as a work of literature, its title inspired a 2012 essay collection by author Keith Boykin. Under 80 pages in print (depending on the edition), this passionate, courageous flash of a book vividly brings to life the outer experience and inner processing of being a woman of color.

Page count: 176

From Pulitzer Prize–winning author Jhumpa Lahiri comes a new novel, published in the United States in 2021. Lahiri first wrote this book in Italian and published it in Italy, then translated it herself, making it quite a departure from her previous work. Anyone who has wondered about their place in the world or felt isolated will find companionship in its unnamed protagonist. In 46 quick chapters, Lahiri takes readers to different locations in the character's life and gives them a close-up view of her thoughts and transformation. Want more book ideas? Browse these books that were made into movies.

Page count: 231

When it comes to hard-boiled fiction, nobody did it better than Raymond Chandler. He died in 1959, but his work lives on. The prolific master of the detective story turned to writing after he lost his job with an oil company during the Great Depression. The Big Sleep, published in 1939, was the first novel of his to feature his famous PI, Philip Marlowe. When a millionaire calls on Marlowe to investigate the blackmailing of his daughters, seduction, kidnapping, and murders ensue.

Page count: 128

In this award-winning 2013 collection of short stories, Guadalupe Nettel offers five entrancing tales in which animals—even fish and insects—reflect hidden aspects of human nature. Like many of the best short books, this one is an international fiction title in translation. Nettel's insights into marriage, family, and desire transcend borders and cultures.

Page count: 128

In her 2011 novel, Kate Bernheimer draws on folklore and fairy tales to vividly evoke the enchantment of a young woman's inner life. This quick read of a novel is the third part of a trilogy in which all three pieces are breathtakingly brief and can be read as stand-alone stories. It's wholly original and compelling, and a smart choice when you're short on time.

Page count: 128

In these crystalline pages, Jean Echenoz imagines the last ten years of Maurice Ravel's life. The 2006 novel opens in 1928, as the great eccentric composer embarks on a grand tour of the United States. Echenoz not only provides a rich portrait of a flawed genius but also illuminates the times in which he lived. For lovers of historical fiction, this one's for you.

Page count: 160

Literary provocateur Gordon Lish has a towering reputation as an editor, teacher, writer, and breaker of paradigms. Goings, published in 2013, is a collection of 13 witty, slyly subversive stories that tackle relationships with the self, family, friends, and lovers. For fans of his earlier books or of the many famous writers he's edited, this won't disappoint.

Page count: 148

Jason Schwartz's innovative 2013 book lives in the shadowlands between fiction and poetry, and it pushes the edges of what it is possible to do with the written word. Schwartz enfolds fictional histories, a possible murder or two, and a slew of startling images in a work that delights and unnerves its adventurous readers. For something totally different (and definitely longer), check out these all-time-best fantasy books.

   

*

We are no longer supporting IE (Internet Explorer) as we strive to provide site experiences for browsers that support new web standards and security practices.

We recommend our users to update the browser.

Close Icon

Galatea Secures $2.7 Million To Help Oil And Gas Companies Tackle Waste Disposal

As regulatory pressure mounts south of the border, Calgary-based Galatea Technologies believes the timing is right to export its waste management logistics software to the United States (US).

Galatea has built a solution to help commodity producers track and dispose of wastewater and other hazardous byproducts more safely and efficiently and established a foothold at home, where it claims to serve half of Western Canada's oil and gas firms.

"This is a great example of where a Canadian company is extremely well-positioned to win in the US market."

Janet Bannister, Staircase Ventures

Now, with a $2.7-million CAD seed extension from Toronto-based Staircase Ventures, Colorado's Ascent Energy Ventures, and the Ottawa-based Natural Gas Innovation Fund (NGIF), Galatea has set its sights on US expansion.

"Mounting [regulatory] pressures in the US have created a market need for the same solution that we've developed in Canada," Galatea founder and CEO Chad Hayden told BetaKit in an exclusive interview.

Galatea's all-equity financing, which closed this January, comes as an extension to the startup's $1.5-million, NGIF-led equity seed round from early 2022. Staircase and Ascent co-led the extension, which was supported by existing backer NGIF. 

This brings Galatea's total funding to over $7 million, a figure that consists of $4.8 million in equity (including a $600,000 friends and family round from 2019 backed by WVL Capital and Calgary angel investors) and $2.2 million in non-dilutive capital.

Founded in 2019 by Hayden, a petroleum engineering technologist, Galatea aims to improve how Canadian oil and gas companies measure and manage the disposal of the polluted water and other dangerous waste they produce through its software.

RELATED: Staircase Ventures bets on Sibli as VC firm reveals first four investments

Hayden and the Galatea team are familiar with existing processes for doing this and the issues associated with them. "We come from this industry [and] we live that pain," he added. "This problem used to be our problem … and now we're here solving it."

In some regions, including many parts of the US, Hayden said that the disposal of this waste is not tracked at all, while in others, it is documented via pen and paper or simple spreadsheets, making it difficult to draw any insight into how to improve the way that it is handled.

Enter Galatea, which sells software that offers companies visibility into waste generation quantities and rates, disposal optionality, risks, and pricing to help them remain compliant with regulations and make the best possible decision on how to dispose of every single load of waste in light of the associated financial and environmental impacts.

"The disposal of waste materials from oil and gas is a massive market," Staircase founder and managing partner Janet Bannister told BetaKit in an interview. "They've got some great traction and we're excited about the business they are building."

RELATED: Carbon Engineering sold to US oil and gas company Occidental for $1.1 billion

Galatea has spent the last five years or so figuring out how to help Canadian firms satisfy strict local regulations and dispose of resource extraction byproducts in a more cost-effective and environmentally friendly fashion.

"Alberta has some of the most stringent environmental, financial, [and] social regulations in all of the world around resource extraction," said Hayden. "We're trying to bring that same system and that same rigour of execution into various jurisdictions across the world."

Hayden noted that in the wake of recent earthquakes, American regulators have been paying closer attention to how local oil and gas companies are handling their waste—at a time when more of the capital flowing into the commodities industry also comes with an eye towards environmental impact.

Some US states, including Texas, Pennsylvania, and Colorado, have tightened or explored altering regulations around the disposal of oil and gas-related waste. Galatea sees room to expand in these regions and help companies both satisfy new requirements and boost efficiency.

RELATED: CleanBC program investigation prompts fear of provincial startup fallout from cleantech and grant experts

Ascent Energy Ventures managing partner David Forsberg believes that the startup is situated well to help US commodity producers and other players across the value chain, including waste disposal sites and transportation experts, navigate shifting regulations. 

"Galatea understands the regulatory burden and how to alleviate that burden better than anyone in the energy space," Forsberg told BetaKit.

Bannister echoed this assertion. "I think that this is a great example of where a Canadian company is extremely well-positioned to win in the US market," she said, noting that Galatea has built, tested, and validated its tech in a tough Canadian regulatory environment. 

"This problem used to be our problem … and now we're here solving it."

Chad Hayden, Galatea

"As US regulations are becoming much stricter—more like the Canadian regulations—Galatea has a solution that has been in [the] market and it's proven effective, and they've been doing this for the last several years," she added, giving it "a huge leg up" on any new entrants.

Hayden said the hardest part about what Galatea does is often convincing companies in the space to begin digitizing, noting that plenty still lag in terms of tech adoption. With regulatory changes looming, he anticipates that many will soon become more willing to do so.

Right now, Galatea's customer base is primarily Canadian oil and gas firms, ranging from multinationals to smaller businesses. Forsberg noted that while Canada's energy waste ecosystem has embraced Galatea to date, the US will likely provide "larger and more diverse opportunities" to expand going forward.

With this funding, plus guidance from Staircase and Ascent, Galatea plans to continue scaling its product and now 15-person team to help commodity producers across the US manage their waste more efficiently and responsibly, starting with Texas.

Feature image courtesy Galatea Technologies.


Short Selling Basics: How It Works

Short selling—also known as "shorting," "selling short" or "going short"—refers to the sale of a security or financial instrument that the seller has borrowed. The short seller believes that the borrowed security's price will decline, enabling it to be bought back at a lower price for a profit. The difference between the price at which the security was sold and the price at which it was purchased represents the short seller's profit—or loss, as the case may be.

Key Takeaways
  • Short selling entails taking a bearish position in the market, hoping to profit from a security whose price loses value.
  • To sell short, the security must first be borrowed on margin and then sold in the market, to be bought back at a later date.
  • While some critics have argued that selling short is unethical because it is a bet against growth, most economists now recognize it as an important piece of a liquid and efficient market.
  • Is Short Selling Ethical? Short selling is perhaps one of the most misunderstood topics in the realm of investing. In fact, short sellers are often reviled as callous individuals out for financial gain at any cost, without regard for the companies and livelihoods destroyed in the short-selling process. Short sellers have been labeled by some critics as being unethical because they bet against the economy. But short sellers enable the markets to function smoothly by providing liquidity, and they can serve as a restraining influence on investors' over-exuberance. Excessive optimism often drives stocks up to lofty levels, especially at market peaks—dotcoms and technology stocks in the late 1990s, for example, and on a lesser scale, commodity and energy stocks from 2003 to 2007. Short selling acts as a reality check that can eventually limit the rise of stocks being bid up to ridiculous levels during times of excessive exuberance. While shorting is fundamentally risky since it goes against the long-term upward trend of the markets, it is especially perilous when markets are surging. Short sellers confronted with escalating losses in a relentless bull market are reminded of John Maynard Keynes' famous adage: "The market can stay irrational longer than you can stay solvent." Overall, short selling is simply another way for stock investors to seek profits. Although short selling attracts its share of unscrupulous operators who may resort to unethical tactics to drive down the price of a stock, this is not very different from stock touts who use rumors and hype in "pump-and-dump" schemes to drive up a stock. Short selling has arguably gained more respect in recent years with the involvement of hedge funds, quant funds, and other institutional investors on the short side. The eruption of two global bear markets within the first decade of this millennium has also increased the willingness of investors to learn about short selling as a tool for hedging portfolio risk. Short selling can provide some defense against financial fraud by exposing companies that have fraudulently attempted to inflate their performances. Short sellers often do their homework, thoroughly researching before adopting a short position. Such research often brings to light information not readily available elsewhere and certainly not commonly available from brokerage houses that prefer to issue buy rather than sell recommendations. The Mechanics of Selling Short Let's use a basic example to demonstrate the short-selling process. For starters, you would need a margin account at a brokerage firm to short a stock. You would then have to fund this account with a certain amount of margin. The standard margin requirement is 150%, which means that you have to come up with 50% of the proceeds that would accrue to you from shorting a stock. So if you want to short-sell 100 shares of a stock trading at $10, you have to put in $500 as margin in your account. Let's say you have opened a margin account and are now looking for a suitable short-selling candidate. You decide that Conundrum Co. (a fictional company) is poised for a substantial decline, and decide to short 100 shares at $50 per share. Here is how the short-sale process works: You place the short-sale order through your online brokerage account or financial advisor. Note that you have to declare the short sale as such because an undeclared short sale amounts to a violation of securities laws. Your broker will attempt to borrow the shares from a number of sources, including the brokerage's inventory, from the margin accounts of one of its clients, or from another broker-dealer. Regulation SHO from the Securities and Exchange Commission (SEC) requires a broker-dealer to have reasonable grounds to believe that the security can be borrowed before effecting a short sale in any security. This is known as the "locate" requirement. Once the shares have been borrowed or "located" by the broker-dealer, they will be sold in the market and the proceeds deposited in your margin account. Your margin account now has $7,500 in it: $5,000 from the short sale of 100 shares of Conundrum at $50, plus $2,500 (50% of $5,000) as your margin deposit. Let's say that after a month, Conundrum is trading at $40. You therefore buy back the 100 Conundrum shares that were sold short at $40, spending $4,000. Your gross profit, ignoring costs and commissions for simplicity, is therefore $1,000 ($5,000 - $4,000). On the other hand, suppose Conundrum does not decline as you had expected but instead surges to $70. Your loss in this case is $2,000 ($5,000 - $7,000). A short sale can be regarded as the mirror image of "going long," or buying a stock. In the above example, the other side of your short sale transaction would have been taken by a buyer of Conundrum Co. Your short position of 100 shares in the company is offset by the buyer's long position of 100 shares. The stock buyer, of course, has a risk-reward payoff that is the polar opposite of the short seller's payoff. In the first scenario, while the short seller has a profit of $1,000 from a decline in the stock, the stock buyer has a loss of the same amount. In the second scenario, where the stock advances, the short seller has a loss of $2,000, which is equal to the gain recorded by the buyer. Short Selling Example: GameStop GameStop (GME), a retailer focused on video games and related merchandise, offers a good example of short selling, how it works, and the risks involved. In 2020, GameStop's stock was performing poorly, trading at $1 or $2 per share. At the time, there was significant short interest in GameStop because investors believed that the company would fall in value. Then, GameStop became part of the meme stock rally. In August 2020, YouTube persona Roaring Kitty posted a video explaining that the stock could rise in value by more than 1,000% thanks in part to the short interest. Later that year, investor Ryan Cohen purchased a greater than 10% stake in the company and joined the board. The stock rose on this news. Shares slowly rose in price before rapidly spiking in January 2021 to a high of more than $80. The short squeeze then began in earnest. As the price of shares rose, people with short positions had to purchase shares to close the position and prevent additional losses. That led to increased demand for GameStop shares, driving the price even higher. This led to a self-reinforcing cycle of short sellers trying to close their positions by buying shares, boosting demand, and leading to higher share prices. This cycle seemed to repeat itself on May 13, 2024, when Roaring Kitty, who had been silent for years, posted on the social media platform X, causing GameStop and other meme stocks, such as theater chain AMC Entertainment (AMC), to surge. GameStop had been trading at about $10 per share in April 2024. But amid a renewed frenzy, the company's shares reached the highest price since 2021, opening at $64.83 on May 14. Meanwhile, GameStop short sellers lost over $2 billion on May 13 and May 14, according to the analytics firm Ortex Technologies. Who Are Typical Short Sellers? Hedge funds Hedge funds are one of the most active entities involved in shorting activity. Most hedge funds try to hedge market risk by selling short stocks or sectors that they consider overvalued. Hedgers Not to be confused with hedge funds, hedging involves taking an offsetting position in a security in order to limit the risk exposure in the initial position. An investor who buys or sells options can use a delta hedge to offset their risk by holding long and short positions of the same underlying asset. Individuals Sophisticated investors are also involved in short selling, either to hedge market risk or simply for speculation. Speculators account for a significant share of short activity. Day traders are another key segment of the short side. Short selling is ideal for short-term traders who have the wherewithal to keep a close eye on their trading positions, as well as the necessary experience to make quick trading decisions. Regulations on Short Selling Short selling was restricted by the "uptick rule" for almost 70 years in the United States. Implemented by the SEC in 1938, the rule required every short sale transaction to be entered into at a price that was higher than the previous traded price, or on an uptick. The rule was designed to prevent short sellers from exacerbating the downward momentum in a stock when it is already declining. The uptick rule was repealed by the SEC in July 2007. A number of market experts believe this repeal contributed to the ferocious bear market and market volatility of 2008 to 2009. In 2010, the SEC adopted an "alternative uptick rule" that restricts short selling when a stock has dropped at least 10% in one day. In 2004 and 2005, the SEC implemented Regulation SHO, which updated short-sale regulations that had been essentially unchanged since 1938. Regulation SHO specifically sought to curb naked short selling—in which the seller does not borrow or arrange to borrow the shorted security—by imposing "locate" and "close-out" requirements for short sales. In October 2023, the SEC announced a new rule aimed at enhancing the transparency of short-selling practices for both regulators and the general public. Investment managers who hold large short positions are required to report those positions to the SEC if the short position in a particular security is at least $10 million or 2.5% or more of the total shares outstanding on average during that month. An aggregated, anonymized version of that data will be disclosed to the public. Risks and Rewards Short selling involves a number of risks, including the following: Skewed Risk-Reward Payoff Unlike a long position in a security, where the loss is limited to the amount invested in the security and the potential profit is boundless, a short sale carries the risk of infinite loss. Meanwhile, the maximum gain—which would occur if the stock drops to zero—is limited. Shorting is Expensive Short selling involves a number of costs over and above trading commissions. A significant cost is associated with borrowing shares to short, in addition to the interest that is normally payable on a margin account. The short seller is also on the hook for dividend payments made by the stock that has been shorted. Going Against the Grain As noted earlier, short selling goes against the entrenched upward trend of the markets. Most investors and other market participants are long-only, creating natural momentum in one direction. Timing Is Everything The timing of the short sale is critical since initiating a short sale at the wrong time can be a recipe for disaster. Because short sales are conducted on margin, if the price goes up instead of down, you can quickly see losses as brokers require the sales to be repurchased at ever higher prices, creating a short squeeze. Regulatory Risks Regulators occasionally impose bans on short sales because of market conditions; this may trigger a spike in the markets, forcing the short seller to cover positions at a big loss. Stocks that are heavily shorted also have a risk of "buy-in," which refers to the closing out of a short position by a broker-dealer if the stock is very hard to borrow and its lenders are demanding it back. Strict Trading Discipline Required The plethora of risks associated with short selling means that it is only suitable for traders and investors who have the trading discipline required to cut their losses when required. Holding an unprofitable short position in the hope that it will come back is not a viable strategy. Short selling requires constant position monitoring and adherence to tight stop losses. Risks Requires constant monitoring and strict trading discipline Unforeseen regulatory bans can cause significant losses and, even without bans, losses can be immense and fast Short selling can incur expensive costs and requires timing capabilities Rewards Short selling offers profit potential by capitalizing on market downturns, counterbalancing the usual long-only momentum Potential benefits from anti-cyclical behavior While short selling entails substantial risk, it also presents opportunities for significant returns Why Do Investors Generally Short-Sell? Investors short-sell to profit from a decline in a security's price. This strategy allows them to earn money during a market downturn. Can Any Security Be Shorted? Not all securities can be shorted. Certain stocks may be designated as "hard to borrow" due to a lack of supply, regulatory restrictions, or the unwillingness of brokerage firms to lend out the securities. What Is a Short Squeeze? A short squeeze happens when a stock's price rises sharply, causing short sellers to buy it in order to forestall even larger losses. Their scramble to buy only adds to the upward pressure on the stock's price. Can You Short-Sell ETFs? Yes, most exchange-traded funds (ETFs) can be shorted like regular stocks. However, because ETFs represent baskets of stocks, they may be less volatile than individual stocks, which could reduce potential profits from short selling. The Bottom Line Given these risks, why bother to short? Because stocks and markets often decline much faster than they rise and some overvalued securities can be profit opportunities. For example, the S&P 500 doubled over a five-year period from 2002 to 2007, but then plunged 55% in less than 18 months, from October 2007 to March 2009. Astute investors who were short the market during this plunge made windfall profits from their short positions. Short selling is, nonetheless, a relatively advanced strategy best suited for sophisticated investors or traders who are familiar with the risks of shorting and the regulations involved. The average investor may be better served by using put options to hedge downside risk or to speculate on a decline because of the limited risk involved. But for those who know how to use it effectively, short selling can be a potent weapon in one's investing arsenal.




    Comments

    Popular posts from this blog

    Karin Slaughter discusses 'Pieces of Her' on Netflix - The Washington Post

    “There’s Nothing to Doooo” - Slate

    24 Must-Read Books For College Students – Forbes Advisor