Short selling and long buying same share?

[skc]

In volatile markets a short and a long openned at the same time with tight stops either way can be worked profitably. The following stats from SPI trading kindly provided from TH's blog (Link here: http://tremblinghandtrader.typepad.com/trembling_hand_trader/2007/07/bear-gaps.html)

Go long on the open with a stop 10 ticks below the open if it gaps down more than 0.3%, hold to close. 133 occurrences, stopped out 86 times 860 lost ticks, not stopped out 61 times total points gained by close of day 1363. End result 1363 - 860 is 503 ticks X $25 is $12,575 profit less brokerage.

Done in reverse that is go short on the open with a stop 10 ticks above the open if it gaps down more than 0.3%, hold to close. 133 occurrences, stopped out 92 times 920 lost ticks, not stopped out 41 times total points gained by close 1321. End result 1321-920 is 401 ticks X $25 is $10,025 profit less brokerage.

So potentially you can do both and get the combined profits.

 

[howardbandy]

Hi Paul --

Yes, you can own a stock and also sell it short.

In the US, that is called "shorting against the box". Its primary purpose is to manage tax exposure. Assume I hold a large position in a stock with a large gain. I want to exit the stock now, but do not want to have the gain recognized in this tax year. I might do that to postpone taxes, or to allow the position to qualify for long-term rates. I essentially go flat by borrowing and selling short enough shares. Whatever happens for the remainder of the year, my profit is locked at the point I put the short position on. When the new tax year starts, I can close both positions and recognize the tax event then.

This is not legal advice. The US SEC has some regulations that affect short sales, including shorting against the box. Consult a tax professional regarding current rules.

Thanks,
Howard

 

[traderc]

Probably the best way of using this strategy is in the futures/commodities markets.

If you are a producer and are holding the actual produce you'd be going long since you'll be selling that commodity and to hedge against this position you'll also be holding the opposite position in futures contracts to the value of the amount of produce you have so if the price drops and you sell the produce for less than you thought the going market rate would be, you'll still make money on the futures contract that you hold as the hedge.

This is effectively what hedging was created for in the first place.

Anyway, hopefully that explains yet another strategy.

Is what futures contracts were originally created for really as there wasn't always enough actual produce in the markets to cover the amount of orders placed, hence the name "future". People made agreements to purchase a produce or commodity from a producer at sometime in the future at a specified price.

For the answer to your question, until you become more familiar with the finer points of the market, I would probably stick to simple trading such as taking an individual position in the market and riding it out or doing something like swing trading.

Alternately, and very similar to trading shares is CFD trading either on shares themselves or index CFDs (which are fairly easy to make money on especially in this volatile market).

Using some very simple indicators to judge the potential direction of the markets such as Stochastic, Parabolic SAR, RSI, MACD and a few others you should stand a pretty good chance of success in picking the direction of the markets.

Most people try to over-complicate the markets. Stick to a few different indicators and create the most simple formula you can through a bit of research and you'll be home and hosed.

Regards,


Christian

 

[clayton4115]

i asked the same question with City Index as you cannot long a stock in which you are currently short or viceversa.

I am trading the asx200 and im short,but i cannot open another new position and go long at the same time.