Reminiscences of a Stock Operator, Chapter 18 summary
Chapter 18 of 24 · 12 min to read the chapter
In Chapter 18, the narrator holds a large short position in Tropical Trading through repeated insider rallies, using sales of Equatorial Commercial to undermine their effect and earning over a million dollars. A year afterward, he reverses another short position when strong buying changes the evidence, but admits that guessing insiders’ intentions costs him some profit.
What happens
- While fishing in Florida, the narrator notices Tropical Trading rising against a weak market and begins selling it short.
- He returns to New York, investigates the business, and builds a short position of 30,000 shares as the price reaches 133.
- When insiders promote rallies, he sells Equatorial Commercial short, making traders distrust Tropical Trading’s apparent strength.
- He holds through repeated squeezes and covers below 90 during widespread selling, earning more than a million dollars.
- A year afterward, unexpected buying makes him cover another short position at 153 and buy shares at 156.
- The stock exceeds 200, but he sacrifices some unrealized profit by assuming the insiders think as he does.
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Why does the narrator sell Equatorial Commercial short during Tropical Trading’s rallies?
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