theoretically, i think it is possible for your shorts to go up as much as your longs (or more). However, i plan to diversify (at least 10 short positions) and keep my short position around 50% of long position at first. Plus, the long position I plan to hedge my shorts with are all momentum and relative strength plays, eg dell, bby, gps, noka. These are high beta stocks and really explode when the market goes up. I also plan to diverdify btw 15-20 of these aggressive long positions. I may consider low beta shorts, also. They may not go down as fast as the market, but they won't rocket past my longs. Avoiding buyouts is an utmost concern of mine. While not foolproof, I think additional screening for co's with high debt and neg EPS I should likely avoid this. Who wants to buy a company that is losing money and a carries a load of debt?
The value portion of my portfolio, such as high dividend, low priced dow and s&P500 stocks, will not be hedged.
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