Update on my new evil scheme,
[to recap, I had a short position for six months, more or less, then grew increasingly disenchanted with it as DDIM continued to rise. So I covered half at a loss, and bought an equivalent amount of DDIM long, at around 32. Now I have the same amount of stock long as short. Wacky, eh?]
Now DDIM can zoom up, down, all around, and I neither lose money nor gain money. So what the #%@?? do I hope to accomplish with this position?
1) Allow DDIM to find a new trading range without losing a buttload of money in the process
2) Once DDIM finds a new range, I'm going to try and trade it. While keeping half my DDIM interest short, just to remind everyone how stubborn I am--oops, I mean, because I still believe the long-term outlook has more downs than ups (even though this could be a year away, maybe longer)
3) If DDIM hits the high 30's, I'll sell the long side, and either a) go short hoping to pick up a few quick points; or b) stay out until it retrenches back to the low 30's, at which point I'll go long again.
4) Repeat step 3 a bunch of times until DDIM either bursts up into an even higher trading range, or drops back into the twenties.
So how's the stragegy going thus far? Since I covered at 32 and the stock is down a bit from that, I would thus far have been better off just maintaining my 100% short position.
So why the #%@?? don't I just cover the entire short if I think short term (next month or two) is likely to be up? Good question!! Mostly, because it would cause me great pain to have been short for so long only to cover at a loss, and then possibly see the stock drift down to the low twenties or high teens again. In any event, this stock moves around so much that at least mid-twenties are possible on the downside, and maybe I'll cover more there. But the upshot of all this is, if I knew exactly where it was heading and when, I would be employing a different strategy than this. This DDIM position has at least the potential of making me money at some point even if I don't know which direction it's going--I can wait with my neutral position until a short-term high is reached, or a short term low is reached, _then_ act accordingly.
It seems to beat sitting on a losing short indefinately...
Alternatively, I could just cover all shorts and sell all longs and wait for DDIM to move, and not hold any interest in it at all; but I hate to cover more at a large loss, and I'm trying to separate the long-term short in my mind from the short-term trading part. My thinking here is still admittedly mushy, but the goal is to still have a short position in year's time, while also making money trying to trade the ups and downs in the meantime.
What do I hope DDIM stock does? Well, I really hope it spikes up to 39 or something that might mark the top of a new range. 39 of course nets me nothing, but from that vantage point I could at least begin trying to trade the range...
-- Pete |
