Simultaneous long and short in same stock

anuragmunjal

Well-Known Member
#11
hi Colombus.
but my question is what purpose does it serve.If I buy 2 lots of nifty and sell 5 lots of mininifty I have a net zero position. I pay brokerage and various charges on both the positions. what do I gain fm this?
I am sincerely missing this point.

regrds
Anurag
 

columbus

Well-Known Member
#12
hi.
If u r buying n selling in the same a/c, u r simply squaring off ur transaction,why would anybody have an issue with that.
take another scenario, u hold an A/c with 2 different brokers, u buy with one broker and his server goes down, u sell it in another a/c with some different broker. at an oppertune time u square off both the transactions. I have done it 100s of times, there is no law which stops u frm doing this till the time ur intentions are not of doing 'circular trading' as mentioned in the previous post .
or am I missing something here?
hi Colombus.
but my question is what purpose does it serve.If I buy 2 lots of nifty and sell 5 lots of mininifty I have a net zero position. I pay brokerage and various charges on both the positions. what do I gain fm this?
I am sincerely missing this point.

regrds
Anurag
Hi Anurag,
You have done HUNDRED of times,whether you do it in different
accounts or in same account means the same.

When the direction is not clear-cut ,one adopts this method.(choppy
market).
 

anuragmunjal

Well-Known Member
#13
hi Columbus
If the direction is not clear cut, the mkt is choppy, if I have no position or net zero position what diff. would it make , it is still beyond me. thnx anyways fr ur time.

regards
Anurag
 

trader.trends

Well-Known Member
#14
hi Columbus
If the direction is not clear cut, the mkt is choppy, if I have no position or net zero position what diff. would it make , it is still beyond me. thnx anyways fr ur time.

regards
Anurag
When the market is trading in a narrow range of say 20 points between 4980 and 5000 and you are expecting a large breakout/breakdown, what do you do? You buy 5 lots of MNF at 4990 and short 2 lots of NF at 4990 and keep a SL of say 4970 for the longs and 5010 for the shorts. Once the mkt breaks the tight range, one SL is hit and with the other you are in trade in the direction of the trend.
 

anuragmunjal

Well-Known Member
#15
dear Trader tends,
I must take this oppertunity 2 say that I hve had the good fortune 2 read a few posts of urs. I have no inhibitions in saying that I learnt a lot frm them. especialy the ones on 'algorithm tradig' where u explained ur techniques too.
I just want 2 say that , whatever the market scenario be if I buy 5 lots of MNf and sell 2 lots of NF, my position is zero. period. once the market breaks out of the range ( taking ur example here) , rther than closing one position and leaving the other position open I would rather ceate a new position n the breakout . I feel I would save a lot on my trading costs that way.

regards

Anurag
 

trader.trends

Well-Known Member
#16
dear Trader tends,
I must take this oppertunity 2 say that I hve had the good fortune 2 read a few posts of urs. I have no inhibitions in saying that I learnt a lot frm them. especialy the ones on 'algorithm tradig' where u explained ur techniques too.
I just want 2 say that , whatever the market scenario be if I buy 5 lots of MNf and sell 2 lots of NF, my position is zero. period. once the market breaks out of the range ( taking ur example here) , rther than closing one position and leaving the other position open I would rather ceate a new position n the breakout . I feel I would save a lot on my trading costs that way.

regards

Anurag
Anurag
Thanks for the warm words.

I was expecting the Q. There are a couple of reasons for doing this. Have you seen a 40-50 point bar on breakout/breakdown? By the time the bar is complete the mkt may be 50 point away from the break point. Then decision becomes difficult. Will you still enter now or wait for a retracement? How many points would you consider a sufficient retracement? Doubts like this will prevent you from pulling the trigger. Suppose you had taken the trade when the scrip was in the tight range, the large move when it comes will take care of the small loss that you suffered on the losing leg.

Second reason is some of us cannot be infront of the screen all the time. But we are expecting the range breakout. So we have the choice of getting into the trade and monitor it later.

What if the scrip ends in the tight range at EOD. You are expecting a gap trade the next day. Here getting into a straddle instead of NF is a way to take advantage of the range break.

I have listed three reasons, there can be more.
 

anuragmunjal

Well-Known Member
#17
hi Trader Trends
Thnx fr ur prompt reply. I have been trading the mrkts. fr the last eighteen yrs sometimes profitably, at times not so profitably.furthar ,I have never seen a chart while trading, I just work on my intution. this was somthing new that I found on this forum, hence so many posts. I jst wanted 2 get the hang of the pcychology. since I am a full time trader who is always in front of the screen , mayb it was a lttle hard fr me 2 comprehend. thnx agan , though our views may differ a little on a few secific issues.

regrds

Anurag
 
#18
...seen a 40-50 point bar on breakout/breakdown? By the time the bar is complete the mkt may be 50 point away from the break point. Then decision becomes difficult. Will you still enter now or wait for a retracement? .....
Yeah this is the kind of expected scenario I was using it for, only in intraday trade on a stock scrip. Once it did blow up both my stoplosses before making the major move, but otherwise it produces pretty good result (2.5+% , above the stop loss losses at around 1% ).

To anuragmunjal - It's the stoplosses that do the important work. You have 2 open positions, one long and one short. When the scrip finally makes a big breakout in up or down direction, the stoploss for unprofitable trade is blown and it is squared, and the profitable trade is the only one that remains in play. Of course, as I found above, there is a good chance both your stoplosses are blown away before the scrip makes the big move.
 
#20
Hi everyone,

I know this is an old thread but I found it while googling a question I had about this very subject. Let me give you an example of why I'd want to go long and short on the same stock.

First, let's assume you have two totally separate IB accounts, in different company names, so they are not connected, but you as an operator of a parent company control both accounts. Let's say there's $1m in each account, so $2m total portfolio.

You then, using portfolio margin, go long on ORC with the full $1m in one account, with say 5x leverage. ORC is an MREIT that's currently paying over 14% dividend. 5x leverage would mean a $5m position with roughly $700k in annual dividends. Then subtract the interest charge for the leverage, which is roughly 80k for the year (~2% of $4m). That leaves you with $620k profit on $1m invested.

Then, on your other portfolio margin account, do the inverse -- 5x leverage on ORC short. This fully hedges the first position. You're also borrowing another $4m with an annual interest cost of $80k.

BUT you're reaping massive double-digit dividends with ZERO risk. Am I wrong?

The totals would look as follows:

$2,000,000 portfolio

$700,000 dividends
-$160,000 expenses
=$540,000 profit

$540,000/$2,000,000 = 27% Yield with ZERO risk!


The question is, is this legal, and perhaps more importantly, possible?