4 ms·

All of your profit in this scenario comes from the market going up, not D going down. That's not a short (or synthetic short) position.

• mathattack 13y ago
  The math still holds if you assume buying back after the drop. Think of it this way - in both cases you're selling today, and buying later. The only difference is the "hold the whole market first" strategy requires more capital. (There are market technical differences too, but for short time periods these aren't as significant)
  • minimax 13y ago
    The only difference is the "hold the whole market first" strategy requires more capital. That's not the only difference. It's not even the biggest difference. The major difference is that in your scenario you have a big unhedged exposure to the market (your p&l depends on the performance of A,B,C) and in the case of just shorting D you don't (doesn't matter what happens to A,B,C). That's a pretty big difference.
    • mathattack 13y ago
      Fair enough, though perhaps we're going too deep down the rabbit hole for a video game. :-)
    • xerophtye 13y ago
      yeah that's not a short at all :/ that's just a long position in all the other stocks and hoping that somehow those stocks have a short position in stock D