Any traders who run a hedged long/short portfolio?

Then there is always the new etfs which are double short many indices. DOG DXD SDS TWM QID and others like DUG which short the oils. Timing is relatively important, as you want to buy the bulk of your port at a major low in the indices. It really does not matter which market throughout the world. If the fed does not cut tommorrow, its boogy time.

Then you may consider pairs, like ITU long/ WB short or FRO long/ GMR short and so on. Timing is extremely important if you want to make money on both ends with pairs. But the traditional long only portfolio is much suited with your ideas of taking some off at the top and grabbing some ultrashort etf, buying them first at overextended markets then letting loose on the positions that are the weakest second. both involve some degree of market timing pairs being the most tedious and extensive. good luck. p
 
Quote from Morton's:

Cutten,

The long term stock market gain is about 10% over time - so the SPY's or the S&P futures are obviously going to pick that up too, since they are the market.

That means, without market timing, your stock picks are going to have to average over 20%/year to net over 10%. You can get around this somewhat by using leverage, but then the interest you pay and the the cash (or credit) reserved for drawdowns must be considered.

Regarding the times when you feel that a catalyst is so "obvious" that it is going to negatively affect the S&P, why not keep your original long stock picks and go straight to the source and short the stocks most related to the catalyst. With the Real Estate example that you used, why not just short a basket of anything from LEN to CFC to HD and etc.

Anyway, if you are going to do this I think you have two obstacles. One - you have to pick stocks that will significantly outperform the S&P. Two - either your S&P market timing has to be above average or you must become very good at identifying sectors that are proving to be a significant lag on the S&P and short the stocks involved. And you have to make sure that you are not too late in recognizing that. When sectors recover, it is often a major stock in the group beating earnings, raising guidance, being upgraded by the #1 or #2 analyst for the sector, etc. It gaps up, its sector mates gap up (somewhat) and the sector recovery rally can end up biting you much worse than a plain vanilla S&P rally.

Morton is on to it.

Imagine that a coin-flipping monkey is managing your Portfolio.

100% Long stock picking = 10% historical return

And now...
100% Long stock picking + Equivalent Short S&P = 0% return (but less volatility)

You can see that the monkey is giving up 10%...
That's why this is rather pointless.

So ASSUMING you can actually outperform the market by picking stocks...
You should:

(1) Go 100% long

OR

(2) Go 50% Long Stock and 50% Short Stock...
Where you are stock picking both long and short.
 
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