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Let me say it another way. It takes a move of much larger magnitude on the short side to produce a $4/shr profit than it does on the long side, for the reasons I stated previously. I'll re-iterate: --------- As a SHORT position moves in your favor, your working capitalization in that...

Consider taking a $10k position from the long side versus the short side, with $2k profit milestones. LONG: $10k -> $12k = 20% $12k -> $14k = 17% SHORT: $10k -> $8k = 20% $8k -> $6k = 25% So how is this funny?

Going short is less favorable due to a reverse compounding effect. As the position moves in your favor, the capitalization of your position decreases, making it harder and harder to generate each unit of return. The opposite is true when going long.

You miss the point. Just because Bernanke said something doesn't mean the nasdaq is going to move 2% in a few hours. People developing the kinds of quant models you're thinking of are simply trying to identify conditions where the market is vulnerable for a fat tail event. The idea is that if...