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Quote from shortie:

the question was about a maximum percentage return on a short position not about a maximum cumulative return on N short positions.
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I see you point shortie. But you are already ahead of 99.99% of the world because of that distinction in your mind. Also, I am going to give the due credit.

You are the first who broke the 200% + interest, with your ETF suggestion (even if I disagree with it as you may carry if you do it that way).

But you are clearly a pro!

Check out about you have read, and tell me if you have come across someone who makes the distinction that this thread is making.

There are other implications of the thoughts behind this question. They are not discussed there.
 
Quote from shortie:

the question was about a maximum percentage return on a short position not about a maximum cumulative return on N short positions.
More...

It appears that the starter of this thread doesn't know what he asked.

by the way in my prior post i said "-" interest not "+". On the margin borrower pays interest.
 
Guys. guys, hold on your horses. The question is not over yet. I will give an example. Let us say we have a stock at a price S. The stock goes to 1, after a time T, and interest rate is I. Margin is denoted M (M=0.5 for Reg T and stocks. You can use K=1/M if it is better for your to express things out).

What will be your max return if you were to short it starting at price S and time 0?

I understand that some people have the thought, but may not write them in precise mathematical terms. Thoughts are more important to me. So, you can give examples instead of using symbols at this point.

Feel free to add variables to express yourself.
 
Quote from balda:

It appears that the starter of this thread doesn't know what he asked.

by the way in my prior post i said "-" interest not "+". On the margin borrower pays interest.
More...

If you wrote "-" on a short position, you did not deserve the crown then, but you deserve a prize for being honest.

However if you think that you pay on a short position, I think you have a real problem and may be taken for a fool by your broker.
 
time makes a big difference.

Example if price drops 10%

in two weeks you make 240% annualized

in one month you make 120% annualized

in one year you make 10%

By the way TIME was not included in original question.
 
That is part of the test. If I were just to give you the result, then I would have to assume that people are not good, which I do not think they are and also the thread may lose its teaching mission if you will. It is also part of the things that you as a pro trader distinguishes when compared to average Joe.


PS: why did is put a MINUS interest instead of a PLUS interest. I thought you got that point, that I did not even read the MINUS. You see I assume that you are razor sharp.
 
Quote from riskfreetrading:

If you wrote "-" on a short position, you did not deserve the crown then, but you deserve a prize for being honest.

However if you think that you pay on a short position, I think you have a real problem and may be taken for a fool by your broker.
More...

If you are short on the margin you pay interest on the borrowed money.

This is how IB calculates it

You sell a stock for a total of 100K with only 50K on the account.

You are being paid on your 50k 1.71% and you are being charged on borrowed 50K 3.71%. So you do pay 2% (annual) on overnight borrowed money.

Now lets say stock drops 10% next day now you have 60K cash and you are getting paid 1.71% on 60K and you pay 3.71% on borrowed 30K.

http://individuals.interactivebrokers.com/en/accounts/fees/interest.php?ib_entity=llc

Now tell me which broker doesn't charge overnight interest on borrowed cash?
 
By the way if the company distributes the dividend (the short seller) pays dividend.

Can you tell me why short seller must pay dividend?
 
Quote from balda:

By the way if the company distributes the dividend (the short seller) pays dividend.

Can you tell me why short seller must pay dividend?
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Change interest rate in above statements to cost of carry (I= riskfreeinterest - dividend). You should focus on the other aspects (you would learn more from them, than from working on the corners).

As for your IB related material, do you mean interest because you are short on margin or interest received on short sales?
 
Ok.. in the REAL WORLD assuming REALISTIC CONDITIONS, on a SINGLE trade in a retail margin account, levered to the max, you can make 500% (minus transaction costs) on a single short trade.

How?

Single stock futures, margin requirement's 20%, so you can go 5 to 1.
 
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