Maybe as a retail trader, shorting has a bad risk premium. But in general, people short for only one reason: to gain leverage and reduce volatility. A hedge fun

Maybe as a retail trader, shorting has a bad risk premium. But in general, people short for only one reason: to gain leverage and reduce volatility. A hedge fund might go %100 long and 30% short for a gross exposure of 130%, gaining both leverage and reducing volatility (which they use to net risk premium through leverage). Or if you’re a quant, you use shorts to make your portfolio market neutral. While a fund might short SPY or QQQ in order to hedge a long position, I don’t think an acute investor would take on a short position of the entire market in order to make a directional play on beta. There are a couple reasons for this: 1. If you’re positive the market is going to crash in a specified point in time, you would want to be more aggressive and buy some puts or vix futures. 2. Beta almost always has positive returns and betting on entire market crashing is almost impossible. You would need to be very confident for it to mathematically make sense, and if you were that confident, you might as well go big or go home (using vix futures, etc). 3. Negative beta exposure historically has been a very bad investment philosophy. While it can make sense to hedge market crashes (though not as often as you would think, puts as portfolio insurance are almost always a bad deal), I don’t think it makes sense to actually try and make money off of it. Either you hedge out all market risk or you take on some market risk. It’s a suckers game to try and profit from negative beta. Some other stuff he says is suspect too. Saying that Tesla can’t crash because the short-sellers will always take profits is a strange thing to say. It’s like saying a stock with a lot of long-interest can’t go up because investors will always take profits: historically untrue.