LONG and SHORT for same script.

Hello Friends,

I have a really simple query. Can we LONG and SHORT(Short Sell) the same script at a same time.? Eg: LONG ICICI as well as SHORT ICICI at same time for 'Pair Trading' purpose.

Depends on how you set it up.
#1. Long in CASH, Short in FUTURES
#2. Long in 1 account, Short in another
#3. Long in Options, Short in Futures
#4. Long in Futures, Short in Options
#5. Long in CASH, Short in Options
#6. Long in this month future, Short in next month future

Basically, you can try various combinations ... either of type of orders, or by multiple accounts. However, being long in futures and short in futures (of the same month) in the same account will not work as your account will have zero holdings and no M2M etc. And except for shorting CASH segment (I am not aware that this is possible), I think all other instruments can be done either short or long.

Hi Sanjose,

Thank you for your response. I have specified my condition in my query. LONG ICICI as well as SHORT ICICI at the same time. But i believe you have answer my query that it cannot be done using 1 account. It will be possible using 2 different account in which we can go LONG in 1 account and SHORT in another account. Plz correct me if i am wrong.

Also as i am learning 'Pair Trading', can some1 suggest how my above mentioned query of going LONG and SHORT for the same script/option, etc can be found to make some profit than huge loss by holding just either LONG or SHORT and making profit/loss either way.

No Jatin, I have talked about many options, and except for using the same underlying instrument (future vs future of same expiry, cash vs cash, option vs option of same expiry and same strike price), you can develop any combination of things in a single account. The example of using a second account, that will be such a rare and cost-"in"effective scenario that I do not think it will be worth it.

How you will utilize this ... I am not so sure. There are a number of pair trade strategies. Unfortunately, I do not have expertise in them, and maybe other members can enlighten.

Thank you sanjose.

Any other knowledgeable members kindly share your views abt my query.

Yes it is very much possible and pretty easy. Let us take an example....

Suppose your first pair is Long X and short ICICI....so you do the trade.....now your position with your broker is + X and - ICICI.....

Second pair is Long ICICI and short Y......so you do that trade too.....now your position with your broker is Long X and Short Y ( ICICI is squared off ) .....so if you are doing both pairs simultanously, might as well do Long X and short Y pair as synthetic trade....but if talking trades at different time...then this is very much possible...

Now suppose you take profits on both legs of your first pair......so you Sell X and Buy ICICI.....so now your position with your broker is Long ICICI and short Y....when you square up both these legs, you sell ICICI and Buy Y ....and now your position with your broker is zero.

This is being done every day by traders who trade swing positions and intraday positions at a time in the same scrip in the same account.....all that one has to remember is what is my intraday position and what is my swing trade position....that is all.

Think more on this and you will see that trading long and short in same scrip and same trading account is also profitable as far as margins are concerned.... Many do it every day without any issues whatsoever....

Smart_trade

Thank you Smart trade. As i am still in learning process, so finding it a bit difficult to understand thought got your point well. :thumb:

Now let me elaborate my query more precisely:
Suppose its 11AM and i want to buy a script X. Now i am not sure which direction the market and the script will go. So in order to be balance on both Bulls and Bears, i want to LONG X and SHORT X simultaneously so that i can sqaure off the losing position (LONG or SHORT depending on the market direction) and continue with my other position in the script. Thus, if market went UP, i will sqaure off or close my SHORT position and vice-versa.

Hope u got my point now and kindly suggest if this strategy can work.

Also as sanjose said earlier, wont doing LONG and SHORT at same time will make the quantity 0.?

Why do all that ? consider in your mind that you are long and short in same scrip....and when you get a buy signal , just buy ICICI....work out with examples....it will give you same profits/ loss as the long/short you have in mind....plus you willl pay less brokerage and slippage,STT,taxes etc.

Smart_trade

You may go long and short in same script at same time with icicidirect in margin plus trading option for intraday only

On lighter side , the strategy outlined by the poster above was a great strategy which many told me when we were in the era of no margins,no M to M etc....it goes like this....open 1000 ICICI long at broker A and 1000 ICICI short at Broker B.....now if the market goes uo Rs 50/- square off your long position and take payout of Rs 50,000 from broker A.....and dont show your face to broker B till the prices come below the level you shorted.....dont answer his phone calls...and once price comes below your shorting price, cover and tell him " sorry boss, had to go out of town for some work urgently....now I am back ...can I have the payout of my profits please ??" .

But the above virtual sure profit strategy has stopped working ever since Stock Exchanges and SEBI started margins and M to M .....no one likes traders making money.....

Just kidding...dont try this strategy.... it is not a fair practice and it wont work in current environments...

Smart_trade