I feel sorry for the person who bought the shares of LinkedIn (NYSE:LNKD) at $122.70.  Now less than a week later, they are selling at under $89.  Ouch!  It shows that the IPO market is not for the faint of heart.

In fact, major media publications – like the Wall Street Journal, Financial Times and Barron’s – are now writing stories about shorting LinkedIn — making money on the stock’s fall.

So how is this done?  Here’s an example:  Suppose you think LinkedIn’s stock price will fall to $80 from $88.  To capitalize on this, you borrow 100 shares and then immediately sell them, giving you a total of $8,800.  This is done by using a margin account with your brokerage firm.

When the stock falls to $80, you then buy the 100 shares back.  The difference of $800 is your profit. 

However, there are some hitches.  For example, you will likely have a difficult time borrowing the shares.  After all, LinkedIn only offered about 8 million total shares.  Hedge funds and other big-time investors will likely get most of the supply.  Keep in mind that they will pay a hefty fee for the shares.

Next, shorting an IPO can be highly risky.  Perhaps the biggest problem is what is called a short squeeze. This hapens when the stock price spikes, making the short-sellers antsy.  As a result, they start to unwind their positions because they need to put up more cash in their margin accounts.  But of course, this means they have to buy more shares, which puts further upward pressure on the stock price.  It’s brutal.

Another approach to short LinkedIn is to buy put options.  This involves paying a fraction of the overall cost of a transaction, which provides lots of leverage.  Unfortunately, put options are also quite volatile.  In most cases, they expire worthless.  Not really good odds, huh?

Ultimately, playing IPOs – whether to go long or short – is extremely tough.  You are playing against the pros, who have the time and experience to make the right moves.  Instead, for individual investors, the best approach is to have some patience before jumping in.  It can save you a bundle.

Tom Taulli’s latest book is “All About Short Selling” and he has an upcoming book called “All About Commodities.”  You can find him at Twitter account @ttaulli.  He does not own a position in any of the stocks named here.