A trader explains why buying stocks near zero offers asymmetric returns: if Apple drops to $1, it will almost certainly bounce back, giving you 100-plus times your money while you can only lose a dollar. Short selling has no floor and unlimited risk, making it far worse.
Trading is complex. It's hard. But when you apply it to the right situations, it can be these simple systems that are effective. Here's my question to you all. Let's say Apple goes from its current price and all of a sudden it's trading at $1. What is the probability of something like Apple bouncing from $1, assuming no news and no fundamental change? It happens super fast. I would argue that the probability of that is going to approach 100%, and I would argue that your wins 100 times plus your money. And what actually is your risk? Even if Apple magically ends up bankrupt the next day, your risk is still $1. So if we were to do this math and know that we can make literally 100 times plus our money while risking a dollar, the expected value is going to be really, really big. Something magic happens in this example because we're going to the downside. We have this lower bound. That lower bound of $0 is actually amazing because it's the most you can ever lose. And the difference in shorting is there is no lower bound and there is no upper bound.
