08-01-2021, 03:41 AM
Why Not Simply Short EMB?
<!-- SC_OFF --><div class="md"><p>This strategy seems low-risk and high-reward so something must be wrong with it. Yet I fail to spot the problem. Could someone please ELI5 how I will lose all my money trying to do this?</p> <ol> <li>Find a bad stock that fails to profit from the insane 2021 growth of the market, yet one that will struggle when a crash happens. EMB is an obvious example, some REIT with properties in hopeless dictatorships will also work.</li> <li>Sell it short.</li> <li>Wait for the crash.</li> <li>If the insane growth continues, happily collect the profit, which will be insane even less the short selling fees.</li> <li>If the market crashes, close the short position and compensate, at least in part, for losses in your long positions.</li> <li>If the growth simply subsides without a crash, reevaluate the situation.</li> </ol> <p>So basically, be long SPY, which is currently bringing handsome profits, and short EMB, as a hedge against the profits disappearing in a crash. How this will ruin a careless investor?</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/less_unique_username"> /u/less_unique_username </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/ovhsio/why_not_simply_short_emb/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/ovhsio/why_not_simply_short_emb/">[comments]</a></span>Kind Regards R
<!-- SC_OFF --><div class="md"><p>This strategy seems low-risk and high-reward so something must be wrong with it. Yet I fail to spot the problem. Could someone please ELI5 how I will lose all my money trying to do this?</p> <ol> <li>Find a bad stock that fails to profit from the insane 2021 growth of the market, yet one that will struggle when a crash happens. EMB is an obvious example, some REIT with properties in hopeless dictatorships will also work.</li> <li>Sell it short.</li> <li>Wait for the crash.</li> <li>If the insane growth continues, happily collect the profit, which will be insane even less the short selling fees.</li> <li>If the market crashes, close the short position and compensate, at least in part, for losses in your long positions.</li> <li>If the growth simply subsides without a crash, reevaluate the situation.</li> </ol> <p>So basically, be long SPY, which is currently bringing handsome profits, and short EMB, as a hedge against the profits disappearing in a crash. How this will ruin a careless investor?</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/less_unique_username"> /u/less_unique_username </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/ovhsio/why_not_simply_short_emb/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/ovhsio/why_not_simply_short_emb/">[comments]</a></span>Kind Regards R