Michael Shulman

Make Big Profits During Bad Times

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Then you separate the stars from the slugs. Do you see a company or two that couldn't make a good decision or manufacture a successful product to save its life? Do you hear about executives dropping off like flies and see its competitors absolutely crushing it in the marketplace? That might be a great place to start your short-side journey.

LOOK FOR OPPORTUNITIES EVERYWHERE

Going back to our consumer-spending example, people start cooking at home more when money is tight. So, you might examine restaurants and department stores as natural avenues for short-side profits.

Personally, I've noticed that it takes half as much time to get a pair of pants hemmed at my favorite clothing store because their seamstress isn't deluged with alterations requests. I've also started getting seated immediately at restaurants where you had to leave your name at the hostess station two hours in advance of when you would be feeling hungry.

Take a look to see if the stores, restaurants, manufacturers and other names you come up with in your research (or simply your everyday experiences) are publicly traded, and make sure they have an options chain available.

Also check out things like short interest, which can let you know how many traders have shorted the stock the traditional way. If the number is high, chances are that put premiums might be expensive, too, as other people have gotten the hint that poor sales this quarter are going to translate into less-than-stellar earnings next quarter.