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To: ConservativeInPA

Time to short was when DOW was flirting with 30,000.
The big money in shorting is already been made.


8 posted on 03/22/2020 7:37:32 AM PDT by entropy12 (You are either for free enterprise or want gov't to guarantee your wages.)
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To: entropy12
That's wasn't my point at all. Let me clarify. Shorting is a tool that is to be used regularly and often to cover positions. Options are another tool to achieve similar effects. The market will go up and down. That is something that I absolutely know. When it will happen, I absolutely do not know. I, by no means, claim to be a market guru. Given the volatility and volume of this market, it is wise to cover your positions. There's another word for this, it is called hedging. I've tried to avoid using that word because people have a negative view of hedge fund managers. They hedge (cover) positions all the time. They use various tools to do it. And it is perfectly legal. Buy into a hedge fund if you have the money and you don't have the time to trade yourself. It's a conservative/safe thing to do.

Let me give you an example using the oil market today ... which is completely whacky given the F'n Saudis and this coronavirus. Crude oil is cracked into two primary products, gasoline and heating oil. Given the time of year, more of one product is refined. (I think you can figure which one is refined more in summer.) Sell crude oil short, buy gasoline and heating oil long, in proportion to the crude oil that you short. If price of oil goes down, the price of heating oil and gasoline will not go down as much. You have an instant profit locked between the two. If the price of oil goes up, and there is that possibility, you know that gasoline and heating oil will go up too. Your short position on oil is covered. But guess what, gasoline/heating oil might go up more than oil and you will have a profit.

That's covering a position.

You can do that futures and options. It works with many commodities, and the same idea works with equities. You just need to know how primary products of equity companies react to one another.

These are actually conservative techniques. You can make a killing by trading naked - uncovered oil futures for example. But you can also get killed if the price goes against you. Be conservative, cover your positions, all the time.

11 posted on 03/22/2020 8:13:43 AM PDT by ConservativeInPA (It's official! I'm nominated for the 2020 Mr. Hyperbole and Sarcasm Award.)
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