Jim Cramer is known by many. People know Jim Cramer picks stocks. Jim Cramer’s stocks often go up just because Jim Cramer picked it. Lots of Jim Cramer watchers buy his picks because he says it is a good buy. Too often the Jim Cramer watcher’s money is what goes “good bye”. Many of Jim Cramer’s watchers are not sophisticated in stock trading. They seem to just go with the flow hoping to make a big score. It is not even sure if any of his pick makes it big, but given the laws of chance, some will be winners.
“Everybody” knows that to make money the traditional way in stocks, buy low and sell high. Cramer is often saying a stock will go up. There does not seem to be any point made that the stock is low, or not, and that the stock “should” or “will” go up is just some figuring out because the stock went down three days in a row. Unless a stock is tanking it will eventually go up.
Believe it or not, a Jim Cramer watcher can make money from Jim Cramer picks. A method of “selling short” can be used to take advantage of a stock that shoots up as most often Cramer’s picks do. The big question is probably, “What is this selling short method?” It is a simple idea but not so easy to make happen on a regular basis. To explain, say person A is talking to person B. Person B wants to buy some item. Person A knows that this item is available for $1,000 and where to get it. Also, person A knows that person C already has one. Also, person A knows that this item will be available in a few weeks at a particular store for $700. So, person A asks to borrow the item from person C for a few weeks. Person C says ok. Person A now takes the item owned by person C and sells it to person B for the $1,000. In a few weeks when the item is on sale person A buys the item for $700 and gives the item back to person C. Person A has earned $300. In the stock market person A borrows the stock from person C to sell to person A at an increasing price. Person A is betting that the stock is going to come down and be cheaper to buy by the time Person A has to buy stock to return to Person C. Regardless of the price at that time, Person A must buy the stock to give back to person C. If person A guessed correctly, person A makes money. If wrong, person A loses money. See, simple.
It comes down to how sure person A is that a Cramer stock will rise long enough to be able to borrow some and sell it at a higher price, and then in the agreed to time between person A and the person who allowed person A to borrow stock that the stock will be lower.