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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: Razorbak who wrote (87646)2/19/2001 5:12:09 PM
From: Heretic  Read Replies (1) of 95453
 
>>Heretic: I like your idea of going long SLB and short OIH, but since SLB has such a strong weighting in OIH, perhaps you might do better going with an individual equity on the balancing short side of the trade?<<

Thanks Razorbak -- I hear what you are saying. However, the weighting of SLB in OIH was less than 8% at Friday's close.

So, making the trade with equal dollars (50% long SLB, 50% short OIH) would have the actual net result of being 46% long SLB & 46% short the other 18 companies in OIH. That's close enough for me to prefer using OIH's primary advantage, which, of course, is minimizing the company-specific risk on the short side. That way, all of the company-specific risk is entirely loaded on the long side with SLB.
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