The danger to short-sellers is that they are wrong, and they could be facing unlimited losses if the stock continues to rise. That particular security could be anointed a favorite among the street, misunderstood, or getting a generous buyout offer.
When financial markets are volatile, brokers make margin calls, which boosts the losses suffered. The higher the amount borrowed, the greater the risk. Given these risks, I have always avoided using margin to buy stocks.
Stocks will pause, reverse, and sometimes fail over time. After a few of these experiences, where my gains disappeared, to be replaced by eventual losses, I changed gears to take small profits at a time.
Don’t chase these stocks after their initial pricing for a while. Statistics show that in the long run, IPOs tend to underperform. There are several reasons for these stocks to do poorly one year after the IPO.