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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club
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To: Gary D who wrote (13596)5/7/2000 4:25:00 PM
From: Gary D  Read Replies (1) of 15132
 
Considering going net short in my IRAs if the market goes much higher from here in the near term. Implementing this risky scheme in real time in an IRA:

1) Preparation steps: to be taken one or more days prior to the day one desires to go net short. Place an order for a 'S&P 500 short' mutual fund. The same day, right at the end of the trading session, purchase an equal quantity of SPY, effectively neutralizing the mutual fund's short effects. The account then holds equal quantities of SPY and the 'S&P 500 short' mutual fund.

2) Implementation--going net short in real time: Sell the desired quantities of SPY in order to go short, attempting to take advantage of intraday price spikes. Can be done in one shot or spread out as desired.

Disadvantages of this scheme versus simply purchasing the short fund alone:
-higher transaction costs
-not earning any interest while assets are tied up in SPY and the short mutual fund at the same time.
-might be unsuccessful in attempting to sell on intraday price spike(s).
-if both SPY and the short mutual fund are held through very large price fluctuations, they will not exactly 'cancel' each other out.
-scheme can only be used to go short up to 50% of the account value.<GGG>
-other????

An alternative would simply be to place an order for the short fund on a day when conditions look favorable for shorting, but then if conditions change later in the day when it's too late to cancel the order, the short fund purchase can be neutralized by purchasing some SPY at the close. One could then later either go short per (2) above, or choose not to go short and just unwind the positions later.

Note: Brinker has not recommended going net short.
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