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Strategies & Market Trends : Jim's Nasdaq100 Special as a basket. -- Ignore unavailable to you. Want to Upgrade?

To: James F. Hopkins who wrote (528)	4/24/1999 2:33:00 PM
From: yard_man	Read Replies (1) \| Respond to of 2103

was looking at the MDA page and you assertions there concerning Short MDY/Long SPY >> The above hedge made 48% in 3 years with out any RISK ! What could you have done legging in and out of the MDY short ? or legging out of the Spy long on down turns ? But just think not touching it; it made 16% a year on your money, ( risk free is the theme here ). Would it always do this good ? NO in a bear market it would not, however it would still make some, because the MID cap can not do as good as the S&P 500 so the short MDY makes more than the long S&P losses in crashes. I'm not trying to recommend this hedge as I know most traders would like to make more than 16% a year , I'm leading up to a point but for now just bear with me. If you read Value Line you will see they point out that in a crash historically Mid and Small caps crash much harder than Large caps. In the big correction from July to Oct 98 the MDY went much lower than the SPY. So Even if you were long the SPY , as long as you were short the MDY ( equal $ ) you made money even during the crash. << How much this paired trade returns depends on the spread at your entry point and exit points -- to say that you would make x% money in a crash based on Oct 98 is probably not good -- we almost had a crash then, not a real crash. To say it is risk free -- that is idiotic. It is a low risk position compared to many others -- especially just long one of those indexes. To do something interesting with it you ought to calculate the return for a given interval and slide that interval forward along the t-axis -- I think you'd be surprised at how variable the return would be -- of course you would have to properly take into account dividends and margin interest and short rebate, if any.