Infographic: Is Short Selling Stocks Worth It?
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Is Short Selling Stocks Worth It?

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For most investors, buying and holding a stock is extremely intuitive.

When you go long, you are betting on that particular company’s success. You are hoping that the market values the stock higher in the future than they do today. Then, when you sell your stake in the company, you’ll realize those gains for a profit.

What is less intuitive is the practice of short selling – or betting against a specific stock or security. While the concept may seem simple at first glance, the actual mechanics behind it are much more complicated for an entry-level investor to understand.

Further, short selling has all kinds of intrinsic risks and costs that need to be understood before it should be used as a tactic. Not grasping these risks can lead to all kinds of horror stories.

Is Short Selling Stocks Worth It?

Today’s infographic comes from StocksToTrade.com, and it addresses the question of whether the risk of short selling is worth the potential payoff.

Our thoughts? Short selling is a tactic used by intermediate to advanced traders, and it should only be attempted by someone who understands the mechanics and risks behind it. Under those circumstances, it can be a useful way to hedge or to profit in a down market.

Is Short Selling Stocks Worth It?

Is short selling worth it? It likely depends on your level of sophistication and risk tolerance.

The Risks of Short Selling

Here are the specific risks of short selling that every investor should be aware of:

  • Losses can keep mounting. The maximum profit you can make is capped at 100% – but if a stock keeps increasing in price, losses can accumulate far beyond that.
  • Additional costs. Short selling has a different set of costs than simply buying a stock. These include margin interest, stock borrowing costs, and dividends.
  • Short squeezes and other events. Stocks with high demand for shorting can have a “short squeeze” – an event that forces short sellers to close out their short positions. This can add even more upward pressure on the stock.
  • Timing is crucial. Over time, generally markets have moved upwards. Even if your short play is a good idea, the market could continue to carry the stock in the interim.

Got a shorting success or horror story? Feel free to share it in the comments below.

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Agriculture

Charted: U.S. Egg Prices More Than Double in 2022

This chart shows the increase in the national average price of a dozen Grade A eggs in the U.S. in 2022.

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This chart shows the increase in the national average price of a dozen grade-A eggs in the U.S. in 2022.

Charted: U.S. Egg Prices Double in 2022

Eggs are a staple food for many countries around the world, and the U.S. is no exception. Americans eat between 250‒280 eggs a year on average.

Eggs are also easy to cook, protein-dense and supply many daily vitamins needed for healthy living, making them a popular meal or ingredient. So when egg prices rise, people notice.

MetalytIQ charted the rapid rise of egg prices in the U.S. during 2022, using data from the U.S. Bureau of Labor and Statistics (BLS).

Eggs-asperating Prices

Over the course of 12 months, the national average price for a dozen large Grade A eggs more than doubled, to $4.25 in December from $1.93 in January.

Egg Prices Per Month (2022)Price per dozen
January$1.30
February$2.10
March$2.50
April$2.52
May$2.86
June$2.71
July$2.94
August$3.12
September$2.90
October$3.42
November$3.59
December$4.25

The biggest culprit has been an avian flu outbreak that resulted in 43 million chickens culled to prevent the spread of the disease.

This led to a severe shortfall in egg supply. Egg inventories in December had fallen by one-third compared to January. Combined with increasing demand during the holiday season, prices skyrocketed and empty shelves became apparent in some states.

This is not the first time avian flu has disrupted the industry.. In 2015, a similar outbreak pushed egg prices up 40% in nine months, reaching a high of $2.97 per dozen eggs in September 2015.

Will Egg Prices Drop in 2023?

Avian flu isn’t the only storm the egg industry has been facing in 2022.

The prices of soybean and corn—the main components of bird feed—account for half of the cost of eggs. They’ve been heavily affected by the war in Ukraine, which has driven grain prices higher.

In the near-term, egg prices are expected to remain high. Containing the avian flu outbreak will remain the biggest factor in determining the prices, but as suppliers increase production, prices may cool off a little in 2023.

Eggs and dairy make up nearly 10% of the average person’s daily calorie intake. Check out the rest of our dietary make-up in Visualizing a Rapidly Changing Global Diet.
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