Shorting Cramer picks

[WiltOnTilt]

The idea is nothing new, obviously, but using my good friend Google I had a hard time finding any concrete guidelines or methodology to shorting his picks.

In short (pun intended), the idea is to short his stock picks on the day following his show as all the sheep blindly follow his pick and proceed to buy at the first opportunity (which is inherently against what he recommends). The short sellers then wait for the stock to settle back where it belongs and ring the register profiting from the cramer bump.

So that's the idea behind it. Do any of you actually do this, or know someone who does? Has there been any documented methodology behind it? I'm not necessarily interested in doing this myself but as I'm learning about the markets I'm interested studying these types of things.

I read the recent Barrons article and some old articles on this effect from 2006, but I'm curious if there are any current blogs or sites that actively take part in this today and document their results?

KoW

[kimchi]

There are a tonne of things that need to be considered before embarking on this type of strategy, which are beyind the scope of this forum. Both shorting and buying stocks based on Cramer's picks can be +EV and -EV depending upon how you implement a strategy.

I'd suggest looking at charts for the week or so before and after he issues his picks and see if you can see any patterns or tendencies emerging. Then you can look for ways to exploit the behaviour of these stocks and develop a basic strategy. It's often about playing the probabilities - just like in poker.

You can then set up a 'play money' account and practice trading.

[+EV]

[ QUOTE ]
The idea is nothing new, obviously, but using my good friend Google I had a hard time finding any concrete guidelines or methodology to shorting his picks.

In short (pun intended), the idea is to short his stock picks on the day following his show as all the sheep blindly follow his pick and proceed to buy at the first opportunity (which is inherently against what he recommends). The short sellers then wait for the stock to settle back where it belongs and ring the register profiting from the cramer bump.

So that's the idea behind it. Do any of you actually do this, or know someone who does? Has there been any documented methodology behind it? I'm not necessarily interested in doing this myself but as I'm learning about the markets I'm interested studying these types of things.

I read the recent Barrons article and some old articles on this effect from 2006, but I'm curious if there are any current blogs or sites that actively take part in this today and document their results?

KoW

[/ QUOTE ]

Just shorting Kramer for the sake of shorting him is a bad idea. Don't forget that the guy is genuinely looking for stocks that will go up.

My advice would be start looking at stocks that you would want to short anyways, and try to get an exaggerated effect if he recommends them.

I bought MO at the beginning of the year after taking a harder look on his recommendation and am up ~10% on the year. Not every stock he picks is going down after the initial bump.

+EV

[critikal]

What's your stop going to be at? Seems like very bad risk/reward.

[Groty]

I was pursuing a similar strategy about a year and a half ago.....except I was shorting his picks in the aftermarket.

I was 6 for 6 in the first 6 times I did it. That led to overconfidence. I remember doubling down on the seventh trade on a Friday. Over the weekend, Goldman published a very bullish report on the company. The Cramer recommendation together with the Goldman upgrade meant there were no sellers and a boatload of buyers. The stock ripped and I got my face ripped off. I had no clue about the investment merits of the company when I entered the trade, so I paid up to cover.

That one trade wiped out nearly all my profits on the previous ones. It was speculative money that I was prepared to lose, but I was very annoyed to have made money on 6 consecutive trades and had almost all those gains wiped out by one trade.

Lesson learned. I haven't done it since.

[all_in_lam]

ive noticed generally his stocks have the immediate jump followed by the dump in the same day/week.

However, over long term the stocks he picks are actually winners. look at ebay, csco, apple, etc.. they are rarely ever losers in the medium-long term.

It will be difficult to determine when to exit, as the period of decline is usually not too long for these stocks as they are generally good companies that he picks.

[Fishhead24]

A few months back CRAMER predicted the market would end the year at 14,548.

At this time he could have many of his viewers and/or fans in dire straits by years end.

[SlowHabit]

I have nothing against Cramer since you gotta do what you gotta to feed your family but I wonder if he ever has trouble sleeping at night when he think about the many lives he screw.

[howdydudey]

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I have nothing against Cramer since you gotta do what you gotta to feed your family but I wonder if he ever has trouble sleeping at night when he think about the many lives he screw.

[/ QUOTE ]

From L.A Times Sept 7th http://www.latimes.com/business/la-fi-cramer7sep07,1,6811123.story?coll=la-headlines-business:
[ QUOTE ]

Given the sheer number of stocks you suggest either buying or selling in any given show, do you worry that you're encouraging people to trade in and out, even though all the research says the vast majority of investors won't make money as active traders?


Let's just say I struggle with it. . . . In Year 1 I was much more oriented toward "stock of the day." And I didn't like that. In Year 2 I went away from that. In Year 3, this year, I'm trying to say, listen, there are broader themes, there are broader sectors, you can try to pick the best of breed in the sector.

I go back to the fundamental idea that stocks can be interesting. And therefore if you're interested, you will be better off than if you just let the broker handle you. You'll be a better client and a better investor.


But you agree that very few people can make a lot of money actively trading?

It's a sucker's game.

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[SunOfBeach]

Hi,

I've considered looking into something like this for awhile now, too. Open offer: if you get me the dataset (ie every pick he's made on his show since it's been on), then I'll add in the price history and some other data and throw it in SPSS to see what I can find us.

PC