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Short Selling- Tim's Trading Challenge

AAOI + TUP: Turning Short Seller Aggression Into Profits

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Written by Timothy Sykes
Updated 8/4/2023 7 min read

I’ve been saying it for a while now…

The market is overextended.

Normally that would make me extremely cautious.

But it hasn’t yet.

Why?

Overaggressive short sellers creating one opportunity after another.

And with their help, I was able to nail two trades on Friday in the tickers AAOI and TUP.

Of course, I love poking fun at how miserable of an existence these short sellers live…

But on the other hand, I appreciate their complete and utter disregard for risk management and boneheaded decision making because they are helping me rack up more profits for me to donate to charity.

Here’s why you need to pay attention to short sellers and how I use them to siphon profits off them.

The Dual Faces of Short Sellers

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Short sellers often portray themselves as heroes, exposing the flaws in companies, and saving investors from bad decisions.

However, trader’s they seem to forget one key variable: Trading is not the same thing as investing.

As a trader you must take risk management into consideration, rely less on the fundamentals and more so on the price action.

Short sellers argue they are doing the world a favor…

But their jaded view on the world…and more so…their over aggressive trading behavior is what’s fueling some of the best squeezes in the market right now.

 

Confessions of A Former Short Seller

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Back in the day I used to focus mainly on shorting pump and dumps.

At the time it was a rather unique strategy.

Short selling was once reserved for professional traders…but with my growing popularity I made it sort of mainstream.

And that’s where I messed up.

You see, so many traders started short selling crappy companies and it made the strategy harder to trade.

In fact, the risk vs. reward skewed and it no longer made sense for me to trade it.

I evolved.

But so many traders haven’t.

Just look at some of the squeezes we’ve seen lately:

MF: +300%

AAOI: +63%

TUP: +44%

And that was just last Friday!

By the way, I love trolling them because I want them to unravel and trade on tilt.

Their reckless decision making is what’s helping me have some of my best trading of the year.

LOL.

Behind My Trades: A Glimpse Into AAOI and TUP

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My recent trades on AAOI and TUP perfectly illustrate how understanding short sellers’ aggression can lead to profits.

For example, TUP traded as high as $7.25 in the after hours on Thursday.

But I waited for a dip on Friday to get in.

I got in at around $5.08 when I saw there was panic selling off the highs.

I was able to exit cleanly at $5.26.

Which was the right move because the stock did get to the $4.60s.

I like quick hitters when I’m trading super volatile stocks.

In addition, if I have a better read on a play, I won’t hesitate to get back in at a later time or what I think a better price is.

Heck, I traded TUP several times last week waiting during panic sell offs and bought the dip.

Each sell-off traps the shorts and puts them in an even worse position…how else do you explain a stock that goes from $0.61 to $7.25 in just a few trading days?

AAOI is another symbol I have been trading a lot lately.

It has gone from $5.86 to a high of $11.29 in a few trading days.

I love the chart on this multi-day runner, and like TUP, I’ve tried to buy on weakness.

Last Friday I saw an opportunity to get in when it was trading $1 off its highs, getting in at $10.33 and out at $10.49.

That’s what I call trading like a sniper.

I’m not one of those traders who picks tops or bottoms. Heck, sometimes I don’t even catch the meat of the move.

But if you’re patient, you can have some great success if you focus on risk management.

I know, because I’ve made nearly $7.5 million in trading profits by using this style.

And like I said earlier, if I get a better read on a play, I won’t hesitate to get back into a stock.

What’s Your Next Move?

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I’ve helped so many of my students take it to the next level. If you’re hungry, disciplined, and understand that mastering trading isn’t a sprint but a marathon, I want you to talk to someone from my team to see if you’re a fit for my program.

It doesn’t cost you a thing…and who knows…it might be life changing.

Click here for the details 

Still undecided about this trading thing?

I get it, maybe you need to see more before making a commitment. Because, I’m not going to lie, it is a commitment.

If that’s you then I invite you to check out these free alerts my team puts together.

What better way to learn than from successful traders.

Click here for more information. 

 


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Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

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* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (205) 851-0506 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”