frommi Posted January 2, 2014 Share Posted January 2, 2014 While thinking about the short context, i thought about shorting and what is the best way to do it. Looking at some stocks like DDD or TWTR i thought that the mispricings on the upper side are a lot greater than on the lower end of the spectrum in the current market. So how is the best way to profit from that? For example for DDD (current price 92.5): - Sell 95$ Calls pros: get 20% if the stock stays below 95, get money upfront cons: unlimited downside - Buy 90$ Puts pros: limited downside, upside around 200% when the stock is halfed cons: high premiun, cost of leverage > 20% - Naked short selling: pros: get money upfront, don`t have to worry about options, can put that money to work in undervalued stocks? cons: unlimited downside, if short selling is banned you can loose your shirt - Sell Calls, buy puts with the money? isn`t it the same as naked short selling? Is hedging the portfolio that way a good idea, and if yes how would you do it? (I thought about hedging with gold/bonds, but they are too expensive for that at the moment for me.) Link to comment Share on other sites More sharing options...
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