KEY POINTS
  • Cramer highlighted used car seller Carvana as an example of a company with a "balance sheet from hell" that is a perfect breeding ground for shorting.
  • To Cramer, short-selling in general is "one-sided and unfair."

CNBC's Jim Cramer warned investors Tuesday not to try and short stocks that have already been heavily shorted.

"It's simple: don't short stocks that are already heavily shorted," Cramer said. "You're not only betting against the company, you're also betting that this won't become a controlled situation controlled by the longs, the buyers, who know that the more they buy, the less likely the short sellers can come out ahead. Eventually, enough short sellers throw in the towel for new shorts to come in, but I don't want to be on either side of this kind of trade at that point."