4 ms·

Continuously shorting IT stocks overnight and buying back at market open

46 points by arcza 2y ago

deleted 2y ago
[deleted]
electroly 2y ago
I wonder if the author meant to pick Akamai (AKAM), not Alkami (ALKT). The latter is an odd choice among the rest of the picks. I suspect they have mixed up the names.
- arcza 2y ago
  I rushed my post and skipped QA, went straight to production. (fixed, thanks)
  - financetechbro 2y ago
    Thanks for the write up. There is a typo in your third thesis bullet, I believe “stratefy” should be “strategy”. Also - I’m curious as to the outcome if you were to exclude AMZN and MSFT. I think their size and broad array of product offerings skews the outcome for this analysis
    - arcza 2y ago
      Yeah you're right. Although, how bad would "S3 is deleted worldwide" be? Or "RDS is down for the foreseeable future"? So IDK... The other problem with them is how big they are, so you can't take proportional weights in them, which messes with risk a bit. I think this is a crap strategy but an interesting idea. As others said, the sentiment scanning probably has a better shot, and you pay the huge spread trading outside RTH.
cedws 2y ago
A better strategy might be to monitor social media to try and gain intel ahead of the market, but it's a arduous task, even with LLMs.
- jfengel 2y ago
  Especially since everyone else is doing exactly the same. The entire point of social media is that it's not a secret.
- ramon156 2y ago
  What if instead of that we use intel from insiders and buy stocks using that! Oh wait, that's illegal when you're not a billionaire.
  - alan-hn 2y ago
    Don't forget you can do it when you're an elected representative too!
    - zooq_ai 2y ago
      Except in very rare cases, congress people have no non-public material information. Nancy Pelosi has as much clue as you about NVDAs prospects. Nancy makes more money than an average HN reader because she isn't too smart to worry about small risks that HN reader gets tripped up. Every one knew about Covid coming. Worse, people who sold off during covid are worse off than the ones who just held it.
      - fshbbdssbbgdd 2y ago
        Indeed, everyone believes congresspeople have some special exception to insider trading rules. In fact, they are subject to the same insider trading rules as everyone else, and the conduct they engage in simply doesn’t meet the (unintuitive) legal definition of insider trading. Some efforts to impose a different, more expansive definition on congresspeople have failed, which might be the source of that misconception.
- vineyardmike 2y ago
  But the whole point is that it's "passive" and trading is closed off-hours.
scosman 2y ago
There’s a decent amount of “good news overnight” because of time zones. Samsung release earnings with higher than expected phone demand, Apple will drop. Apple releases higher device projections, TMC will rise. Nokia releases new projections, people say “oh yeah, Nokia is a thing”.
- modeswitch 2y ago
  What about limiting your exposure to companies that operate in the same time zone as your stock exchange?
  - vineyardmike 2y ago
    Only if their suppliers and competitors are in the same time zone too.
hakdbha 2y ago
[dead]
almog 2y ago
While I'm not suggesting it's a good strategy to short continuously, unless you short a hard to borrow stock, the borrowing fee for shorting a stock is typically much lower (as in 0.25% yearly) than the interest you can get on the cash you get to hold after short sell a stock (should be 4.5%-5% with the current fed funds rate). So, other than the transactions fee, shorting a stock that doesn't move is a way to arbitrage the spread between the Fed funds rate (minus 0.5% or so depending on your broker) and the stock borrowing rate.
- arcza 2y ago
  Yep. As a retail guy though, I get no rebate however on that cash. I just pay the 25bps pa AFAICT.
  - almog 2y ago
    Not sure about other brokers but with IBKR I get paid interest on shorted stock. If you don't your borrowing fees are essentially higher than they could be.
    - GenerocUsername 2y ago
      This whole thread looks like nonsense to everyone outside the weird finance bubble
zooq_ai 2y ago
Stocks can tick upwards (between close and open) and there may be more up days than down days destroying your strategy
- arcza 2y ago
  Correct but respectfully I think you didn't read the post fully. I mentioned within I'd hedge by buying an equal dollar amount of NDX futures which makes it a bit more beta neutral. If those stocks rise, so does the NDX, and my losses on the shorts are offset. But the whole thing won't work anyways due to high trading costs. Unless somehow you can make markets very well at huge scale.
meatmanek 2y ago
> Should we trade telcos? > Nope, BGP is a great protocol used in the Internet; it would be so difficult for a single name stock to take down the global Internet. hahaha hahahahahaha hahahaha hahahahahahahahahah this is a joke, right? https://www.kentik.com/blog/a-brief-history-of-the-internets-biggest-bgp-incidents/ https://www.kentik.com/blog/a-brief-history-of-the-internets...

46 points by arcza 2y ago

deleted 2y ago

[deleted]

I wonder if the author meant to pick Akamai (AKAM), not Alkami (ALKT). The latter is an odd choice among the rest of the picks. I suspect they have mixed up the names.

arcza 2y ago
I rushed my post and skipped QA, went straight to production. (fixed, thanks)
- financetechbro 2y ago
  Thanks for the write up. There is a typo in your third thesis bullet, I believe “stratefy” should be “strategy”. Also - I’m curious as to the outcome if you were to exclude AMZN and MSFT. I think their size and broad array of product offerings skews the outcome for this analysis
  - arcza 2y ago
    Yeah you're right. Although, how bad would "S3 is deleted worldwide" be? Or "RDS is down for the foreseeable future"? So IDK... The other problem with them is how big they are, so you can't take proportional weights in them, which messes with risk a bit. I think this is a crap strategy but an interesting idea. As others said, the sentiment scanning probably has a better shot, and you pay the huge spread trading outside RTH.

cedws 2y ago

A better strategy might be to monitor social media to try and gain intel ahead of the market, but it's a arduous task, even with LLMs.

jfengel 2y ago
Especially since everyone else is doing exactly the same. The entire point of social media is that it's not a secret.
ramon156 2y ago
What if instead of that we use intel from insiders and buy stocks using that! Oh wait, that's illegal when you're not a billionaire.
- alan-hn 2y ago
  Don't forget you can do it when you're an elected representative too!
  - zooq_ai 2y ago
    Except in very rare cases, congress people have no non-public material information. Nancy Pelosi has as much clue as you about NVDAs prospects. Nancy makes more money than an average HN reader because she isn't too smart to worry about small risks that HN reader gets tripped up. Every one knew about Covid coming. Worse, people who sold off during covid are worse off than the ones who just held it.
    - fshbbdssbbgdd 2y ago
      Indeed, everyone believes congresspeople have some special exception to insider trading rules. In fact, they are subject to the same insider trading rules as everyone else, and the conduct they engage in simply doesn’t meet the (unintuitive) legal definition of insider trading. Some efforts to impose a different, more expansive definition on congresspeople have failed, which might be the source of that misconception.
vineyardmike 2y ago
But the whole point is that it's "passive" and trading is closed off-hours.

scosman 2y ago

There’s a decent amount of “good news overnight” because of time zones. Samsung release earnings with higher than expected phone demand, Apple will drop. Apple releases higher device projections, TMC will rise. Nokia releases new projections, people say “oh yeah, Nokia is a thing”.

modeswitch 2y ago
What about limiting your exposure to companies that operate in the same time zone as your stock exchange?
- vineyardmike 2y ago
  Only if their suppliers and competitors are in the same time zone too.

hakdbha 2y ago

[dead]

almog 2y ago

While I'm not suggesting it's a good strategy to short continuously, unless you short a hard to borrow stock, the borrowing fee for shorting a stock is typically much lower (as in 0.25% yearly) than the interest you can get on the cash you get to hold after short sell a stock (should be 4.5%-5% with the current fed funds rate). So, other than the transactions fee, shorting a stock that doesn't move is a way to arbitrage the spread between the Fed funds rate (minus 0.5% or so depending on your broker) and the stock borrowing rate.

arcza 2y ago
Yep. As a retail guy though, I get no rebate however on that cash. I just pay the 25bps pa AFAICT.
- almog 2y ago
  Not sure about other brokers but with IBKR I get paid interest on shorted stock. If you don't your borrowing fees are essentially higher than they could be.
  - GenerocUsername 2y ago
    This whole thread looks like nonsense to everyone outside the weird finance bubble

zooq_ai 2y ago

Stocks can tick upwards (between close and open) and there may be more up days than down days destroying your strategy

arcza 2y ago
Correct but respectfully I think you didn't read the post fully. I mentioned within I'd hedge by buying an equal dollar amount of NDX futures which makes it a bit more beta neutral. If those stocks rise, so does the NDX, and my losses on the shorts are offset. But the whole thing won't work anyways due to high trading costs. Unless somehow you can make markets very well at huge scale.

meatmanek 2y ago

> Should we trade telcos? > Nope, BGP is a great protocol used in the Internet; it would be so difficult for a single name stock to take down the global Internet. hahaha hahahahahaha hahahaha hahahahahahahahahah this is a joke, right? https://www.kentik.com/blog/a-brief-history-of-the-internets-biggest-bgp-incidents/ https://www.kentik.com/blog/a-brief-history-of-the-internets...