Brec - I am sorry...am not following your logic to your conclusion
It is a given that any short position has more risk than a long position...no one can or should argue that point...
So if you were to attempt to argue relative (whatever that means) risk in long Vs. short you have to be able to compare apples to apples...create a laboratory where you are comparing like to like
Let's say I have two accts:
a $100,000 acct and sell short a stock 1000 shares @ $30, setting a $10 stop (for the sake of argument let's not worry about margin, buying power, marked to market etc), my potential risk to equity (keeping stop)is 10 * 1000 = $10,000...
short 1000 @ $30 @10 am acct value $100,000
10:30 stock @$40 acct value $90,000
cover @ 40 @ 10:31 acct value $90,000
a $100,000 acct and buy long a stock 1000 shares @ $30, setting a $10 stop, my potential risk to equity (keeping stop)is 10 *1000 = $10,000
long 1000 @ $30 @ 10 am acct value $100,000
10:30 am stock @$20 acct value $90,000
close @ 20 @ 10:31 am acct value $90,000
Risk in theory and in effect are the same in both accounts.
I know I have kept it simple...hope not too simple, or am I missing your point entirely, always a possibility, I can be dense and/or single-minded at times.
There are other factors that(to some traders)increase the risk of shorts but IMO not from a strict valuation point of view
Respectfully,
Cormac |
