This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Nu Skin Shows Why You're a Fool For Shorting Herbalife

I'm not a fan of network marketing and have zero desire to join one, but that doesn't mean anything to me in relation to the investment thesis. Not everyone shares my agnostic opinion between a stock and the underlying company. Not understanding that the price is what you pay, and the value is what you receive costs investors a lot of money.

Don't make the same mistake and short a stock because you don't like the company or buy because you do. Allocate your investment capital based on if you have a measurable edge compared to your counterparty.

Remember, every time you make a trade, there is someone with the exact opposite opinion as you. That's what makes a market and someone is the smart money, and the other is the dumb money. If you can't clearly articulate the advantage you have over the other party then maybe you're not the smart money in that particular situation.

Herbalife shorts face a real possibility that they will wake up one morning and find their accounts are bleeding red. Shorts buying put options to limit risk probably will lose money because the implied volatility (time premium) is so rich that even if shares fall, option decay requires that the price fall fast and hard to profit.

Stocks with over 20% short interest and already beaten lower rarely continue lower at a rapid pace when they pay an oversized dividend, profitable, and feature a low price-to-earnings multiple. In other words, the time to short was when Herbalife traded above $70. Is it possible to make money shorting now? Sure, but don't try to predict the future, try to make solid decisions based on available information.

If you want to gain exposure, think about selling call options. The option premium is rich, and a covered call will have less of a "roller coaster" impact on your portfolio.

At the time of publication, Weinstein had no positions in securities mentioned.

Follow @RobertWeinstein

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

2 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,979.13 +59.54 0.35%
S&P 500 1,986.51 +4.91 0.25%
NASDAQ 4,526.4820 -1.0320 -0.02%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs