OT--I like to have most of my positions long, and a few shorts to reduce the risk of the portfolio. If the market gets killed, I hope to make some profit on the shorts, which I can then reinvest in some (cheaper) longs. If the market moves up, I may well take a hit on the shorts, but my overall return should still be positive. Is this risky? Hardly. If I have 20 equal-sized positions, mostly long but some short, and allow for a 25% downside in a short, then my risk on that one short is only 25% of 5% or 1.25% of the portfolio. No big deal.
I bet if I Asked Jeeves what he thinks, in a year or two when the service improves enough to justify nearly $5 billion of market cap (today), Jeeves will be able to reply, "Yes, sir, your logic is impeccable, and here are four web sites to look at where you can find discussions about using a mix of long and short positions in a portfolio to reduce risk and increase return."
I covered my Ask Jeeves short with a (small in $ terms) hit. Maybe I can put in back the day before the Macy's Thanksgiving day parade if the weather report says high winds. I figure in a high wind, the Ask Jeeves balloon will pop in front of millions of viewers as they sit down to their turkey dinners. That will be worth minus $50 to ASKJ. And here a few months ago I was told I would be sitting down to my turkey dinner expecting to see how the newly issued New York Stock Exchange shares would open. (Ok, I lied, I never believed that one.) |
