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Strategies & Market Trends : Stochastics
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To: Jeff Jordan who wrote (296)3/2/1998 1:19:00 PM
From: R. Gordon  Read Replies (1) of 927
 
Jeff,

Yes, $2 is $2, but in the real world it doesn't matter how many dollars you make on a trade, what matters is the percent of gain or loss. If that is taken into consideration, you have a greater potential for gain in the long positions. Maximum gain in a short is 100% - maximum gain in a long is unlimited.

Taking a more extreme example - buy at 2 sell at 6 = 300% gain or 1000$ becomes 3000$. Sell short a 6 and buy back at 2 = 66% gain. $1000 becomes $1666.

Richard
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