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Strategies & Market Trends : Margin Calls - Share The Pain

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To: daffodil who wrote (127)	12/10/2000 11:23:33 AM
From: Mama Bear	Read Replies (1) of 158

"What's a paired trade? " A paired trade is going long and short two related securities. An example of one I did earlier this year was to go long COMS and short PALM in anticipation of the PALM distribution. Another that some like is to go long a closed end country specific mutual that trades at a discount and short the WEBS for the same country. If the discount on the fund narrows the trade is successful. One that I'm considering now is long EXTR and short CSCO. Since I believe EXTR will grow at a faster rate than CSCO it makes sense. Yes, I could lose money on the CSCO short, but would expect to make more on the EXTR long. If the market dives and EXTR goes down, CSCO would also likely fall cushioning the blow. Of course in the best possible world EXTR rises and CSCO implodes, but that's not the goal. Now if I could only get a short rebate I might start doing more pairs. Maybe someday I'll be that rich. Regards, Barb

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