Its 2000 all over again

[HolyGrail]

Quote from fickletrader:

Here's why position capitalization matters when dealing with profit targets:

----------
Trader 1:
short 1000 TZOO @ $100
1000 x $100 = $100,000 starting capitalization

cover 1000 TZOO @ $10
1000 x $10 = $10,000 ending capitalization

VS.

Trader 2:
long 1000 TZOO @ $10
1000 x $10 = $10,000 starting capitalization

sell 1000 TZOO @ $100
1000 x $100 = $100,000 ending capitalization
----------

Both traders took $90/shr on 1000 shares out of the stock for the exact same profit. The difference is that the short trader took ten times the starting capital to make the same gain as the long trader.

Which trader can achieve a higher return on portfolio capital? The long trader.

Why does the short trader have nothing in his account? You can't short without money in your account.

 

[jho]

Trader 2 should be long at $100, why does he get to be long at $10?

 

[fickletrader]

Quote from DHOHHI:

So the long has 50% more capital at work in your scenario which is the difference between your 17% and 25% figures.

That is exactly my point.

 

[HolyGrail]

I give up. This is the last time I will even speak to this as it is absolutely ludicrous.

Trader 1.

10,000 in his account
buys 1000 shares at 10.00
sets his stop at 8.00
gets stopped out. He now has 8000 in his account

trade 2
10,000 in his account
sells short 1000 shares at 10.00
He now has 20,000 in his account
He sets his stop at 12.00
the stock moves to 12 and he gets stopped out.
He covers, and they remove 12,000 from his account
He now has 8,000 dollars

both accounts are equal
both accounts risked equal amounts.


This is the way it works. Period. End of story. Done. Your wasting my time now. see ya

 

[fickletrader]

Quote from jho:

Trader 2 should be long at $100, why does he get to be long at $10?

Because the profits on the long side of TZOO began closer to $10 than $100, and the profits on the short side began closer to $100 than $10. Why should they both start at $100? So that we can make an imaginary 90 point move on the long side after $100?

 

[jho]

Quote from fickletrader:

Because the profits on the long side of TZOO began closer to $10 than $100, and the profits on the short side began closer to $100 than $10. Why should they both start at $100? So that we can make an imaginary 90 point move on the long side after $100?

F that noise...what if the shorter wanted to short at $10? Then the starting capitalization would be the same.

 

[trade7]

 

[fickletrader]

Quote from HolyGrail:

I give up. This is the last time I will even speak to this as it is absolutely ludicrous.

Trader 1.

10,000 in his account
buys 1000 shares at 10.00
sets his stop at 8.00
gets stopped out. He now has 8000 in his account

trade 2
10,000 in his account
sells short 1000 shares at 10.00
He now has 20,000 in his account
He sets his stop at 12.00
the stock moves to 12 and he gets stopped out.
He covers, and they remove 12,000 from his account
He now has 8,000 dollars

both accounts are equal
both accounts risked equal amounts.


This is the way it works. Period. End of story. Done. Your wasting my time now. see ya

LOL you're posting this like I'm saying it isn't true. I'm not saying that at all. What you posted is true, but it doesn't disprove what I posted, so wtf is your point?

 

[eagle]

Yes, there's different. You need a margin account for shorting stock while going long you don't have to have a margin account, a cash account is sufficient. LOL.

 

[HolyGrail]

My point is the RISK IS THE SAME. Your point is MEANINGLESS DRIBBLE!!