I apologize to anyone if this question insults you. I ask this question becuase I really do not know and want some info. Sorry if I waste your time.
Hedge stocks with a prop
- Thread starter DreamTrader
- Start date
(OK, since my name was already brought up, LOL). ..
Owning a stock and shorting a stock at the same price is exactly the same as having no stock. You buy at $20, you short at $20. Stock goes to zero, you lose $20 on the long, you make $20 on the short. Fair enough?
Now stock goes to $300. You make $280 on long, you lose $280 on short, right? Net zero, right?
In the days of the uptick rule etc., some would think that by being long and short, they could hit bids with their "long" stock thus running out of long stock and forcing the stock down, making money on the shorts net net. I've only been trading since 1979, and people have asked me that same question since then. You cannot be long and short, you are flat. No "dividend play" - no nothing, period.
Some used to (before the uptick rule elimination) would buy 30,000 shares of BAC, and short 30,000 shares of JPM (for example) - before an announcement or something. They would then cover whichever was the bad side and make money on the other side. BUT, not with the same stock.
There is no "economic reason" for such a position, thus red flags etc.
Can't believe I used "thus" so often in one post, LOL.
All the best everyone....
Don
Owning a stock and shorting a stock at the same price is exactly the same as having no stock. You buy at $20, you short at $20. Stock goes to zero, you lose $20 on the long, you make $20 on the short. Fair enough?
Now stock goes to $300. You make $280 on long, you lose $280 on short, right? Net zero, right?
In the days of the uptick rule etc., some would think that by being long and short, they could hit bids with their "long" stock thus running out of long stock and forcing the stock down, making money on the shorts net net. I've only been trading since 1979, and people have asked me that same question since then. You cannot be long and short, you are flat. No "dividend play" - no nothing, period.
Some used to (before the uptick rule elimination) would buy 30,000 shares of BAC, and short 30,000 shares of JPM (for example) - before an announcement or something. They would then cover whichever was the bad side and make money on the other side. BUT, not with the same stock.
There is no "economic reason" for such a position, thus red flags etc.
Can't believe I used "thus" so often in one post, LOL.
All the best everyone....
Don
Yes but you wouldn't make any money if you actually entered long and short positions as you would be flat, in other words have no stock at all.
Are you trying to say you would want to bracket the stock ? if its trading at 40 you would want to enter a limit short order at 39 and a limit long order at 41 and have them simply rest until the stock hit either one ? Not sure what your trying to say but the way your explaining it, it will not work. You can do what your saying with options but make sure you give them enough time because time works against you.
I say you use think or swims paper trading account and test your strategy first... Good luck
Yes, the "old school" strategy of fishing for break outs or break downs can be done with stop orders - correct. I'm not sure what he's asking for sure either. If you did this enveloping with stops, you need to watch them, or have a "one cancel the other" type as well. Don't want to have a short sale order in after you bought the stock of course.
Don
Quote from Don Bright:
Yes, the "old school" strategy of fishing for break outs or break downs can be done with stop orders - correct. I'm not sure what he's asking for sure either. If you did this enveloping with stops, you need to watch them, or have a "one cancel the other" type as well. Don't want to have a short sale order in after you bought the stock of course.
Don
Yeah I'm not sure what he's asking either... Unless he thinks he can be both long and short a stock at the same time and then use a stop to exit the direction that moves against him and let the other side run which is why he said the winner will be more then the loser. If that's what your thinking/asking dreamtrader it cant be done. You cant be long and short in the actual stock at the same time.
Nick
I suggested to him that he may just want to enter a buy stop and sell short stop enter order, above and below the current price, to trigger the net position he wants. Be sure to watch out not to get caught in a "wiggle" that would execute both orders.
Don