Ike, Simple answer is, it doesn't. The 90/10 is basically a long options, long cash strategy. The paired trades are in my income accounts. Lately, I've only been able to do them for the partnership accounts because, as an individual, I can't get the short sale rebates I used to get. My partners, being that they have a lot to say about who gets what rebate at their brokerage firm, surprise, can get a great rebate on their shorts. <g>
There are all kinds of paired trades. There are those like Long Exxon, Short Texaco, back when they were Aramco partners, where the basic businesses were nearly mirror images, excepting the larger scale of Exxon. Long Synopsis, short Autodesk wasn't quite as close a match, but close enough for me. Then there were those like Long Intel, Short Motorola, where I didn't really like either co., but thought Motorrotor was way overpriced relative to Intel. Not at all mirror images, but still in the same general sort of business. And way out there is something like a long Incyte, short Micron, where there is basically no relationship other than that I thought MU was ft and Incyte was cheap. That kind sort of pushes the "income" concept and is probably more of a capital appreciation play. I do them in both types of portfolios. But never in the 90/10. |
