If you knew this, how many contracts would you buy/sell?

C

coolweb

Hello,

Lets say.


1) Current range is:
The price of an equity within the range of $50.20 - $50.30
10 cent dead zone.

2) You have a 90% probabiliy it will drop to at least $45.00

3) IT is also trending down.

4) The price should never break $50.31


You can also use YM/NQ/ES futures with the same situation.


How many contracts or stocks would you go short?

100 shares?
500 shares?
5 shares?

10 contracts?
2 contracts?
50 contracts?
500 contracts?
 
If liquidity is not an issue and there is a 90% probability that the stock will drop 5+ points in my favor and I can use 50.31 as my stop for my entire position so I am risking 11 cents to make 5+ points, I would short at least 100,000 shares. I'd be willing to lose $11k to make over 500k. Of course this scenario is highly unlikely, as no one can predict with 90% certainty where any stock will go but with this example, I would short as much as I could (of course my firm would never give me that much buying power :D ).


Quote from coolweb:

Hello,

Lets say.


1) Current range is:
The price of an equity within the range of $50.20 - $50.30
10 cent dead zone.

2) You have a 90% probabiliy it will drop to at least $45.00

3) IT is also trending down.

4) The price should never break $50.31


You can also use YM/NQ/ES futures with the same situation.


How many contracts or stocks would you go short?

100 shares?
500 shares?
5 shares?

10 contracts?
2 contracts?
50 contracts?
500 contracts?
More...
 
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